Exclusive: Renters face being pushed out of London as landlords struggle to cope with ‘huge’ mortgage hikes, adviser warns
Landlords in London and the south east are facing a 125 per cent increase in monthly mortgage payments, or £574 on average, according to research exclusively shared with Morning Wire
The Bank of England’s decision to raise interest rates 11 times over the last 15 months has seen mortgage costs spiral for mortgage borrowers.
Earlier this month the city watchdog warned an extra 356,000 mortgage borrowers could face payment difficulties by the end of June 2024, in addition to those who are already behind.
The Financial Conduct Authority (FCA) said those living in London and the South East, where house prices are higher than the UK average, were also particularly likely to be stretched.
London Money, an independent financial adviser which specialises in mortgages, said it had carried out research which had shown that buy to let (BTL) borrowers faced repayment hikes of 125 per cent.
Martin Stewart director of London Money said the firm had monitored its BTL transactions for six months from last September.
He said: “We wanted to see what the damage was looking like in real terms for those landlords coming off of historically low fixed rates.”
In September last year it had noted a 50 per cent increase in payments among buy to let borrowers who needed to remortgage, equivalent to a monthly mortgage increase of £296 per month.
This increased to 77 per cent in October or £372, then 87 per cent , or £526, in November.
This increase levelled out to 10 per cent in December of £66, although this may have been a seasonal anomaly with people were waiting to until January before deciding to remortgage.
In February the increase stood at 125 per cent, equivalent to a monthly mortgage increase of £574pcm.
Stewart that this would be pressure on renters as landlords sought to recoup their additional costs via rental increases.
He warned that this may result in a “displaced work demographic as renters may be forced to relocate to cheaper areas while “many landlords could defer urgent remedial work on properties due to the damaged cashflow”.
“It was obvious to us when the markets imploded back in September where the direction of travel was going to be. Whilst we had seen rates beginning to rise at the start of the year it was the aftermath of the September fiscal statement that really unsettled the markets, and the rates began to decouple from reality.
“Whilst we have seen rates rise across the board for all forms of lending, I think BTL landlords are going to be acutely affected because of the way the market works due to background stress tests.
“I can not see the rest of the year being any different from hereon in and we will be seeing a lot of people coming off rates as low as 1.5 per cent and re-fixing at around 5 per cent, so that February number could become even worse over time.”