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Landlord's interest-only mortgage costs triple since 2021

Landlord's interest-only mortgage costs triple since 2021
Anna Sagar
Written By:
Anna Sagar

Monthly costs for landlords using interest-only mortgages have nearly tripled since 2021, research has shown.

Landlords making full monthly repayments have seen their costs climb by nearly three quarters over the same period, according to Octane Capital.

The firm looked at the latest rates available for a 75% loan to value (LTV) two-year fixed rate buy-to-let mortgage and how they have changed on an annual basis.

The research estimated that in 2021 the average monthly mortgage payment for a buy-to-let mortgage making a full monthly repayment came to around £804 per month, and those on interest-only were making payments of around £272 per month.

Octane Capital said that since 2021, buy-to-let mortgage rates have increased from around 1.65% in October 2021, just prior to the first base rate increase, to 5.72% in October 2023.

The average landlord is now paying £1,371 per month when making a full monthly repayment, which is up 71% compared to October 2021.

For those on interest-only payments, these have risen to around £1,042 per month.

Interest rates edging downwards

However, the report revealed that the cost of two-year fixed rates has started to come down, going from 5.87% to 5.72% between October 2022 and October 2023.

Octane Capital CEO Jonathan Samuels, said: “It’s been a challenging year for the nation’s landlords, as mortgage repayments have dramatically eaten into their profit margins, margins that have already been reduced due to a string of legislative changes from the government in recent years.

“Those who opt to pay an interest-only payment have seen a particularly large jump in the monthly cost of their mortgage and so it’s no wonder many landlords are dubious about their future in the sector and the profitability of their portfolio.”

He added: “One positive is that buy-to-let rates now seem to be on the slide, after increasing rapidly between 2021 and 2022. With the Bank of England holding the base rate since August, it seems that trend could continue as we move into 2024.”