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Landlords paying £100 a month more for mortgages

Squeezed profits will mean higher rents for tenants.

Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Squeezed profits will mean higher rents for tenants.

Landlords are paying £100 a month more for mortgages and will see profits squeezed thanks to “relentless” interest rate increases, rising house prices and stricter tax rules.

A buy-to-let investor taking out a typical £160,000 mortgage with a 40pc deposit would have paid £262 a month in January, based on the average two-year fixed-rate of 1.69pc. However, the same borrower would now have to pay £365 a month.

This is because average rates have risen to 2.46pc, according to Property Master, a broker. Angus Stewart, of the company, said rates were rising and deals were being withdrawn “more or less on a daily basis”.

He added: “Rates may look low from an historical point of view, but the increases we are seeing come at a very bad time. Increased taxes and regulation have already chipped away at profits. Now increased borrowing costs are making margins slimmer still."

Landlords also face paying for costly mandatory energy efficiency improvements in the coming years, although these could be capped at £10,000 per property.

Lenders have also increased stress-testing on buy-to-let mortgages over worries tenants will struggle to pay rents because of the cost of living crisis. This has reduced how much landlords can borrow and has meant there are now fewer options for investors to borrow, pushing up prices.

Mr Stewart said the accumulation of these rising costs would force landlords to pass them on to tenants and push up rents, only exacerbating the problem.

Rates double for owner occupiers

Owner occupiers have also been stung by higher remortgage costs, with the average two-and five-year fixed rates having more than doubled since October.

The average two-year mortgage from the top-10 lenders now charges 2.36pc, compared with just 0.89pc in October. The average five-year deal has soared from 1.05pc to 2.46pc, according to L&C Mortgages, another broker.

This followed the fourth consecutive rate increase by the Bank of England last week, when the base rate rose from 0.75pc to 1pc. Interest rates are now the highest they have been for 13 years.

David Hollingworth, of L&C Mortgages, said the mortgage market was moving at "breakneck speed" as lenders scrambled to manage their pricing. He added: "This often results in deals lasting days rather than weeks and presents a real challenge for borrowers trying to keep on top of things."

This article was written by Rachel Mortimer from The Telegraph and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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    Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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