26th
Jun 2023
A buy to let mortgage broker says the government should not only help home owners with their mortgages but must do the same for PRS landlords with their rocketing increase of mortgage payments.
Angus Stewart of the online mortgage broker, says: “The continued increase in interest rates is causing a perfect storm. George Osborne’s changes to the rules on interest rate relief in 2015 had minimal impact when interest rates were low. However, they are now seriously impacting the profitability of a landlord’s business.
“Coupled with much tougher affordability rules means that many landlords cannot remortgage at current rent levels leaving them on the lender’s SVR some of which are approaching 10 per cent. They are mortgage prisoners, and the logical option is to sell or substantially increase rent.”
The brokerage recent survey of their customer base found 40 per cent of landlords have in the past few months sold a property or are now seriously considering selling one or more properties in the very near future.
Stewart says: “If this came to fruition, the impact would be very significant on tenants and the overall housing market. Recent press talk has been of helping homeowners with the increasing costs of mortgages but it’s important that the Government doesn’t ignore Landlords which are a key source of housing with five million households.”
His comments follow this week’s Bank of England’s base rate rise from 4.5 to 5 per cent; besides being the 13th consecutive increase since December 2021 it is already the fifth consecutive hike so far this year, and could be likely to ‘mirror’ 2022’s eight consecutive base rate increases.
As a result, the current rate of 5.0 per cent is the highest seen in over 15 years since April 2008.
A leading industry body’s reaction to BofE’s latest increase, says: “This decision will add further pressure on renters and landlords alike. Some 85 per cent of buy to let mortgages are interest only, making them especially hard hit by rising mortgage costs.
“Some landlords have seen mortgage payments rise by almost 240 per cent since December 2021.
“Analysis has found that 735,000 rental properties could be lost across the UK if interest rates peaked at five per cent, further exacerbating the supply crisis renters are facing.
“It makes no sense to have a tax system that discourages investment in the homes renters need, and benefit payments that fail to provide vulnerable tenants with the assurance that they can afford their rents. The Chancellor needs to take urgent action to support the rental market by reintroducing mortgage interest relief in full and unfreezing housing benefit rates.”
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