Propertymaster said a typical five-year fixed rate buy-to-let mortgage with a loan to value (LTV) of 60 per cent for £160,000 rose from 2.8 per cent to 3.24 per cent up 0.44 per cent between June and July.
The meant the monthly cost rose from £388 to £447 or £59 per month more once fees were included.
The increase was slightly less for two-year fixed rate mortgages. The cheapest typical buy-to-let mortgage is for a two-year fixed rate mortgage, for £160,000 with a LTV of 60 per cent, moved up from 2.69 per cent to 3.12 per cent between June and July, which is an increase in monthly cost from £395 to £452 or £57 per month more, once fees are included.
The broker said the average five-year fixed rate BTL mortgage had increased by £174 per month since the start of the year.
Landlords urged to be prepared
Angus Stewart (pictured), chief executive of Property Master, said: “These latest increases in mortgage costs for landlords are going to shock many.
“Landlords, like so many people, are being squeezed on all fronts. Increasing amounts of taxation, regulation and the cost of building materials are already impacting margins. But whilst mortgage rates remained at such a low level the business of investing in property still made sense for so many. Increased mortgage interest costs such as these which, due to tax changes, now can’t be offset for the majority of landlords as they could in the past, are a real threat to landlord profitability.”
“There are a range of issues at play in the buy-to-let mortgage market in addition to rising Bank of England rates that are exacerbating the situation for those landlords looking for competitive mortgage finance. Volatile financial markets have impacted on some lenders ability to stay in the market as they would wish whilst others are swamped with applications and are using the blunt instrument of rates to reluctantly control the flow of business.
Steward urged landlords to be ready to move very quickly if they did need new finance. He added: “Mortgage products can appear and then disappear within a matter of days and therefore to secure a decent rate a landlord needs to have all their information available quickly. For some it may even be worth paying an early redemption fee to jump on a good new deal.”
Marcus Wright, managing director at Bolton Business Finance, said rising buy-to-let rates were a much bigger problem for investors in London and the southern counties.
He said: “Yields are much lower. Some London post code areas have yields as low as two to three per cent. Whereas popular northern towns and cities like Manchester, Bradford, Leeds, Newcastle – and my lovely home town Bolton – still offer yields of eight to 10 per cent. So if investors are worried about rising rates, then they need to make sure the properties they invest in have a strong yield and sufficient profit margin between rent and interest payments.”
