New data from Dashly, the mortgage insight platform that monitors over £100bn of mortgages, shows that landlords in London renewing their mortgage in the autumn and spring will be, on average, £6,384 worse off each year.
Based on a sample of 1,000 buy-to-let mortgages in the capital with initial rates expiring between September 23 and April 24, and assuming borrowers switch to the best available rate instead of lapsing onto their standard variable rate, Dashly’s analysis found that the average monthly mortgage payment for London landlords is set to rise from £662 to £1,194 as the remortgage crunch takes hold — an increase of £532 compared to the current average deal secured during a period of historically low rates.
The result is an average increase in mortgage payments for London landlords of £6,384 per year, which equates to an 80% rise. The average buy-to-let mortgage rate, according to Dashly, will rise from 2.24% to 5.42%.
Dashly CEO, Ross Boyd, said: “Millions are feeling the remortgage crunch but few, based on this evidence, are feeling it like London’s landlords.”
Brokers and lettings agents confirmed the gravity of the situation on free newswire Newspage. Imran Khan, co-founder of Canary Wharf-based lettings specialist, PropertyLoop, said simply: “London landlords are nearing crisis point. In my 20 years working in property, I’ve never seen such a precarious landscape.”
Ominously, Khan added that it’s not just smaller, amateur landlords who are suffering. “One recent example involved a landlord with a 100-property portfolio who had to hand back keys due to untenable mortgage payments.”
The result of higher interest rates and increased taxation, Khan says, is “an unprecedented exodus of landlords from London, which risks driving up rental prices due to decreased supply”.
One professional portfolio landlord in the capital, Kundan Bhaduri, director of The Kushman Group, said: “With average monthly mortgage payments set to rise from a relatively benign £662 to a bone-crushing £1,194, the current situation for most small landlords in London is like riding a unicycle on a tightrope over a pit of sharks.”
Bhaduri added: “With most small landlords in the capital only having small savings to hand, it’s hard to see how a major repossession crisis can be averted. The Government and Treasury in particular must step in immediately to stop the brutal treatment of the buy-to-let mortgage sector.”
Craig Fish, managing director at London-based mortgage broker, Lodestone, said many landlords are now looking beyond the capital, in many cases far beyond, to make the numbers stack up, which in turn will impact London house prices: “The mass exodus will soon begin, which in turn will have a significant downward impact on property prices in London and the south-east.
“Many of our professional landlord clients have now shifted their attention away from the capital to the Midlands and north of England where rental yields are more favourable.
“We are also witnessing a similar exodus in the lender community, with many high street lenders making changes that eliminate most landlord scenarios. This will result in only specialist buy-to-let lenders remaining, with a focus on limited company lending.”
Khan agreed with Fish that the current lending environment is not helping landlords: “Santander’s new affordability rates announced late August aren’t an anomaly, they’re a sign of more constraints to come.” Much the same conclusion was drawn by Riz Malik, director of independent mortgage broker, R3 Mortgages: “When attempting to refinance, landlords’ choices are often limited, and some can’t even secure enough funds to settle their existing mortgages, trapping them in their current financial arrangements.”
Meanwhile, Samuel Mather-Holgate of financial advisory firm, Mather & Murray Financial, said landlords in the capital are between a rock and a hard place: “Landlords in London are faced with two bad options: accept massively higher interest rates, which mean you’re over £500 per month worse off, or sell up at a discounted price to get out of the chaos that is being a landlord in the capital. Buy-to-let has been hit with multiple tax changes over the years making it difficult to make a profit, but the latest rate rises have seen a lot of geared landlords incurring a significant loss. This will fuel the oversupply of property for sale in London and prices will continue to spiral downwards.”
Justin Moy of broker EHF Mortgages confirmed that a growing number of London landlords are now throwing in the towel, preferring a reduced sale price to ongoing pain: “More and more smaller landlords will attempt to sell their way out of this rather than ride it out. London landlords are dammed if they stick, dammed if they sell.”
