The rising costs of BTL borrowing

No household or business across the UK has escaped the escalating costs of an array of goods, services and borrowing over the past six to twelve months. Of course, the impact of this additional financial pressure will vary from individual to individual and from business to business but in the wake of an eleventh consecutive interest rate hike, the impact on residential buyers, landlords and even tenants is evident.

According to new research from Octane Capital – which analysed the current cost of the average buy-to-let mortgage and how this monthly repayment has increased in the last year – the cost of maintaining a monthly buy-to-let mortgage interest payment has climbed by 75.7% in the last year, with those making a full mortgage repayment each month seeing an increase of 31.6%.

The research showed that the average buy-to-let investor is currently borrowing £217,364 after placing a 25% deposit on the average UK property price of £289,819. With a current average buy-to-let mortgage rate of 5.32%, this would see the average investor pay back £1,312 when making a full monthly repayment.

The average mortgage rate has increased by 2.12% in the last year alone, meaning that the average monthly cost of a full mortgage repayment has increased by 31.6%, adding £315 to the cost of buy-to-let borrowing.

Despite this increased cost, investor appetites for buy-to-let investment remains strong and previous research by Octane Capital outlined that the total value of loans issued to buy-to-let investors has climbed by 12% over the last year, one of only two sub-sectors to see positive movement for two years in a row.

This data helps demonstrate some of the challenges facing landlords but also the robust nature of a BTL sector which continues to show its vast strength and ongoing potential in the face of some adverse conditions. Not that we should be surprised. This is a marketplace which has a history of exceeding expectations and defying its critics – and long may this continue.