Many landlords are not passing higher mortgage costs on to tenants

UK landlords are facing mortgage costs rising quicker than rent increases in the past year – but they aren’t passing all the rise on to tenants, a new study reveals.

Octane Capital has compared how rents have increased over the past year versus the average cost of buy to let mortgage payments, based on the average price for a new tenancy and the cost of a BTL mortgage with a 40% deposit.

The study found that mortgage rates have risen by 13% year-on-year, outstripping rent price growth of 9.9%.

This is closing the gap between mortgage and rental payments, as mortgage costs now average at £982 per month, compared to £1,068 for rents.

‘Landlords are often blamed for ramping up rents’

Octane’s chief executive, Jonathan Samuels, said: “While landlords are often blamed for ramping up rents, in many cases buy to let mortgage costs are rising faster than the cost of new tenancies.

“This is particularly the case in Yorkshire and the Humber and the East Midlands, where the markets clearly don’t allow landlords to recover all their higher outgoings in the form of rents.”

He added: “This year has undoubtedly been a tough one for landlords and renters – as neither has been able to escape rising costs.”

Mortgages rise at more than double the rate of rents

The specialist property lending experts also revealed regional variations with some areas seeing mortgages rise at more than double the rate of rents.

This suggests that some landlords are not passing on all their rising costs to tenants and may be feeling the pinch in their profits.

The regions where mortgages have risen at more than double the rate of rents are Yorkshire and the Humber and the North East.

In Yorkshire, mortgage payments have surged by 15.2% year-on-year to £712, while rents have risen by 7.4% to £826.

In the North East, mortgage rates have increased by 15.4% to £547, while rents have gone up by 7.6% to £636.

London rents have increased by 12.9%

London does not follow the general trend since rents have increased by 12.9% year-on-year, exceeding an 11.4% increase in mortgage payments.

As a result, the capital’s tenants have to fork out £2,109 per month for a new tenancy, which far exceeds average mortgage repayment costs of £1,789.

In Scotland, the government’s policy of controlling rents on existing tenancies appears to be having the opposite effect for new tenancies, which are 15.8% more expensive annually at £973, a bigger percentage increase than any other region.

This compares to mortgage costs of just £643 per month north of the border, after rising by 12.4% year-on-year.

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