By Landlords have seen their mortgage payments rise at a faster rate than rents in the past year, signaling that some investors aren’t passing on all their rising costs to tenants.
New research from Octane Capital, compared how rents have increased over the past year versus the average cost of buy-to-let mortgage payments, based on the average price for a new tenancy and the cost of a buy-t0-let mortgage with a 40% deposit.
Across Great Britain as a whole mortgage rates have risen by 13.0% year-on-year, outstripping rental price growth of 9.9%.
This is closing the gap between mortgage and rental payments, as mortgage costs now average at £982 per month, compared to £1,1068 for rents.
Where landlords are swallowing mortgage costs
Mortgages have risen at more than double the rate of rents in Yorkshire and the Humber and the North East, signalling that landlords are feeling the pinch the most in those regions.
In Yorkshire mortgage payments have surged by 15.2% year-on-year to £712. Over the same period rents have risen by 7.4% to £826 – so the gap is closing between the two.
Similarly in the North East mortgage rates have increased by 15.4% to average at £547 per month.
This compares to a rental price increase of 7.6%, bringing it to £636 per month.
London and Scotland – where it’s toughest to be a tenant
London doesn’t tally with the general trend, as rents have increased by 12.9% year-on-year, exceeding a 11.4% increase in mortgage payments.
As a result the capital’s tenants have to fork out £2,109 per month for a new tenancy, which far exceeds average mortgage repayment costs of £1,789.
In Scotland the government’s policy of controlling rents on existing tenancies appears to be having the opposite effect for new tenancies, which are 15.8% more expensive annually at £973 per month, a bigger percentage increase than any other region in Great Britain.
This compares to mortgage costs of just £643 per month north of the border, after rising by 12.4% year-on-year.
While it’s true to say that mortgage costs are rising at a faster rate than rental payments, it’s important to note that rising mortgage costs are coming from a lower base than rents.
CEO of Octane Capital, Jonathan Samuels, commented:
“While landlords are often blamed for ramping up rents, in many cases buy-to-let mortgage costs are rising faster than the cost of new tenancies.
This is particularly the case in Yorkshire and the Humber and the East Midlands, where the markets clearly don’t allow landlords to recover all their higher outgoings in the form of rents.
This year has undoubtedly been a tough one for landlords and renters – as neither has been able to escape rising costs.”
| Table shows the annual change in rents and B2L mortgage payments and how the two compare | ||||||||||||
| Location | Ave rent – July 2022 | Ave rent – July 2023 | Rent change £ | Rent change % | Estimated BTL mortgage repayment – July 2022 | Estimated BTL mortgage repayment – July 2023 | BTL mortgage change £ | BTL mortgage change % | Difference (£) in change | Difference (%) in change | ||
| East Midlands | £781 | £840 | £59 | 7.6% | £730 | £835 | £106 | 14.5% | £47 | 79.4% | ||
| East of England | £1,081 | £1,169 | £88 | 8.1% | £1,049 | £1,181 | £132 | 12.5% | £44 | 49.6% | ||
| London | £1,868 | £2,109 | £241 | 12.9% | £1,606 | £1,789 | £183 | 11.4% | -£58 | -24.0% | ||
| North East | £591 | £636 | £45 | 7.6% | £475 | £547 | £73 | 15.4% | £28 | 62.0% | ||
| North West | £890 | £976 | £86 | 9.7% | £637 | £722 | £85 | 13.4% | -£1 | -0.6% | ||
| South East | £1,205 | £1,323 | £118 | 9.8% | £1,170 | £1,320 | £150 | 12.8% | £32 | 26.8% | ||
| South West | £1,061 | £1,128 | £67 | 6.3% | £975 | £1,084 | £109 | 11.2% | £42 | 62.4% | ||
| West Midlands region | £835 | £927 | £92 | 11.0% | £746 | £842 | £96 | 12.8% | £4 | 3.9% | ||
| Yorkshire and the Humber | £769 | £826 | £57 | 7.4% | £619 | £712 | £94 | 15.2% | £37 | 64.4% | ||
| Wales | £768 | £838 | £70 | 9.1% | £644 | £722 | £78 | 12.2% | £8 | 11.9% | ||
| Scotland | £840 | £973 | £133 | 15.8% | £571 | £643 | £71 | 12.4% | -£62 | -46.5% | ||
| England | £1,009 | £1,104 | £95 | 9.4% | £914 | £1,033 | £119 | 13.0% | £25 | 25.9% | ||
| Great Britain | £972 | £1,068 | £96 | 9.9% | £868 | £982 | £113 | 13.0% | £17 | 17.7% | ||
- Average rental data sourced from Homelet
- B2L Mortgage rates sourced from Moneyfacts, the Intermediary and BSA and based on a mortgage with a 40% deposit on the current property values in each area according to the Gov – UK House Price Index
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