Reducing B2L rates see landlords bolster portfolio sizes
CEO of Octane Capital, Jonathan Samuels, has highlighted how greater mortgage market stability and a reduction in buy-to-let mortgage rates has helped revitalise the nation’s landlords, with the latest data showing that the average size of a buy-to-let portfolio has actually increased so far this year, despite the continued talk of a mass exodus of landlords from the sector.
Octane Capital analysed the average monthly cost of a buy-to-let mortgage and how this has changed since interest rates started to climb in December 2021, since they were held in September of last year and following the first interest rate cut in four years in August of this year.
The analysis by Octane Capital shows that in December 2021, when interest rates first started to climb, the average buy-to-let mortgage, at an average rate of 1.70%, required a monthly interest only repayment of £286 – climbing to £827 for a full monthly repayment.
Fast forward to September 2023 and following 14 consecutive rate increases which saw the base rate climb to 5.25%, the average landlord faced a far higher monthly mortgage repayment.
In fact, the analysis by Octane Capital shows that the average buy-to-let mortgage rate climbed to 5.99% and, as a result, the full monthly mortgage repayment had increased to £1,382 per month, an increase of 67%. What’s more, those opting to make an interest only repayment saw the monthly cost of a mortgage increase by 274% to £1,071 per month.
However, since September 2023, a hold on the base rate has helped to bring greater certainty to the mortgage sector and, with the addition of a first rate cut in four years coming in August, buy-to-let borrowing affordability has increased.
The latest figures (August 2024) show that the average rate of a buy-to-let mortgage has fallen to 4.33%, which in turn has seen the average full monthly repayment dall by -12% to £1,212 per month, whilst the average monthly cost of an interest only payment has fallen by -25% to £801.
Despite much talk of the continued mass exodus of landlords from the sector, additional data from Pegasus Insight shows that those who have remained are doing so with confidence. The latest figures show that during the second quarter of this year, the average portfolio size of a buy-to-let landlord increased from 7.2 to 7.6 properties.
Across the East Midlands, the average portfolio size increased by 2.5 properties between Q1 and Q2, with increases also seen across Wales (+1.9), the North West (+1.0), the East of England (+0.5) and the South East (+0.5).
CEO of Octane Capital, Jonathan Samuels, commented:
“Our new Labour Government has shown early signs of intent with respect to rental market reforms, the majority of which are seemingly designed to further deter investment within the buy-to-let sector.
Despite this, those intent on remaining within the sector are doing so with confidence, with landlords across the nation bolstering their portfolio sizes so far this year.
This confidence has come following the greater degree of mortgage market certainty that has materialised following a hold on interest rates and, as a result, landlords are benefiting from reduced monthly mortgage costs.”