0:05 AM, 21st June 2023, About 9 months ago 4
Landlords are now scrambling to sell their high-yielding rental properties as rocketing mortgage rates hit profit margins on even the most lucrative investments, the Daily Telegraph reports.
In data provided by Hamptons estate agents, the report reveals that 25% of buy to let properties sold this year have boasted yields of 7% or higher.
That is a significant increase from 19% of BTL homes being sold last year.
With more than one in seven properties sold in 2023 previously classified as buy to let, investors are now rapidly exiting the sector.
Aneisha Beveridge, the head of research at Hamptons, told the newspaper: “This reflects how higher interest rates are affecting the profitability of higher-yielding homes, putting more landlords who used to earn healthy returns under pressure.”
However, while the volume of sales remains consistent with last year’s numbers, the types of properties landlords are offloading have notably shifted.
In 2022, just 42% of properties sold by landlords had a rental yield that was below 5%.
This figure has now dropped to 34%, highlighting a big shift in investor focus.
The proportion of landlord sales featuring yields between 5% and 10% has risen from 56% to 63%.
Buy-to-let mortgage rates have experienced a sharp increase in recent weeks, with the average two-year fixed rate reaching 6.21%, up from 5.62% at the end of May, according to data company Moneyfacts.
This rise has significant financial implications for investors, as the annual cost of a typical £150,000 BTL loan on an interest-only basis has surged by £885 in under three weeks.
The situation is even more dramatic for investors nearing the end of their fixed-rate deals, the Telegraph says.
A landlord who secured a two-year fixed rate in June 2021 at an average rate of 2.96% will face a rate that is more than double when refinancing.
Consequently, a typical interest-only borrower can expect their yearly payments to rocket by £4,875.
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