Landlords could face payment hike of £225 a month for buy-to-let mortgages

The payment shock for an ageing rental population could impact market dynamics.

Around 350,000 Buy-to-Let (BTL) mortgages are set to mature over the next 12 months, which could see many landlords facing higher rates, according to the Private Rented Sector Report published by The Mortgage Works.

This comes amid a “marked change” in the renting landscape, as the number of landlords with five or more properties rose from 5% in 2010, to 18% in 2021 based on data from the English Private Landlord Survey.

Conversely, in 2021, 43% of all polled landlords owned one rental property, down from 80% in 2010.

Coupled with significant rate increases in 2021, this has continued to present challenges to landlords with the report suggesting that maintaining current levels could have long-term effects.

With a typical interest rate of a BTL mortgage at around 2.7% on those loans due to mature over the next 12 months (according to The Mortgage Works), this includes the likelihood of a ‘payment shock’ of £225 per month.

However, an ageing renting population in part due to the ongoing struggle to get on the property ladder, has led to “strong rental growth in recent years”, which has helped to mitigate pressure in the BTL sector.

For instance, the number of people aged between 55 and 64 privately renting surged by 80% in 2023 compared with 2013.

Meanwhile, homeownership for the same age group is still experiencing an “ongoing decline”, now sitting at almost 10 percentage points below its 2007 peak.

“Understanding the dynamics of the private rented sector has never been so important,” commented Damian Thompson, Director of Landlord at The Mortgage Works.

“The sector continues to support the lives of millions of people across the UK by providing homes for those who either can’t afford to buy or prefer not to own a home”, he continued.

With the report suggesting a “clouded” future for the private rented sector, Thompson looks forward to “understanding new Government’s plans to create a stronger, fairer private rented sector, where legislation works for both landlords and tenants”.