The average size of a landlord’s portfolio has increased this year amid falling mortgage rates, according to research.
Octane Capital suggested landlord confidence has grown off the back of falling buy-to-let (BTL) rates.
This is despite other research showing some landlords exiting the market ahead of the Chancellor’s mooted increase of capital gains tax (CGT).
Octane Capital analysed the average monthly cost of a BTL mortgage and how this has changed since interest rates started to climb in December 2021.
It looked at how they were held in September of last year and the first interest rate cut in four years in August of this year.
In December 2021, when interest rates first started to climb, the average BTL mortgage was at a rate of 1.7%.
Market Moves: Understanding UK Housing Trends
Introducing the first in our video series “Market Moves: Understanding UK Housing Trends” The
Sponsored by Halifax Intermediaries
It required a monthly interest-only repayment of £286, climbing to £827 for a full monthly repayment.
Fast-forward to September 2023 – and following 14 consecutive rate increases that saw the bank rate climb to 5.25% – and the average landlord faced a far higher monthly mortgage repayment.
The average BTL mortgage rate climbed to 5.99% and, as a result, the full monthly mortgage repayment had increased to £1,382 per month, an increase of 67%.
Those opting to make an interest-only repayment saw the monthly cost of a mortgage increase by 274% to £1,071 per month.
However, since September 2023, a hold on the bank rate has helped to bring greater certainty to the mortgage sector, according to Octane Capital.
In addition, there has been the first rate cut in four years, which came in August, and BTL borrowing affordability has increased.
The latest figures from August 2024 show that the average rate of a BTL mortgage has fallen to 4.33%.
This has seen the average full monthly repayment fall by 12% to £1,212 per month.
The average monthly cost of an interest-only payment has fallen by 25% to £801.
Boosted confidence among landlords
Octane Capital suggested the falls have boosted confidence among landlords.
During the second quarter of this year, the average portfolio size of a BTL landlord increased from 7.2 to 7.6 properties.
Across the East Midlands, the average portfolio size increased by two-and-a-half properties between the first and second quarters of the year.
Increases were also seen across Wales – up 1.9 – and the North West – up by one – with the East of England and the South East both up 0.5 on average.
Jonathan Samuels, chief executive of Octane Capital, said: “Our new Labour government has shown early signs of intent with respect to rental market reforms, the majority of which are seemingly designed to further deter investment within the buy-to-let sector.
“Despite this, those intent on remaining within the sector are doing so with confidence, with landlords across the nation bolstering their portfolio sizes so far this year.
“This confidence has come following the greater degree of mortgage market certainty that has materialised following a hold on interest rates and, as a result, landlords are benefitting from reduced monthly mortgage costs.”
