July 20, 2024

Almost 150,000 landlords facing ‘significant’ jump in mortgage costs in 2024

Reductions in tax relief on buy-to-let mortgages, which were phased in between 2017 and 2020, have amplified the impact of higher rates on landlords who own properties in their own names. 

The new rules mean landlords are no longer able to deduct all of their mortgage interest as a business expense when they calculate their tax bill. This means they have to pay tax even if their properties are loss-making.

Michelle Lawson, director at Lawson Financial, said landlords rolling off five year fixed deals will be forced to raise rents as they pass on these costs to their tenants.

Ms Lawson said: “Profit margins have dropped massively for landlords due to the tax and regulatory burdens.”

The 144,000 figure is based on official mortgage data from UK Finance, which represents Britain’s banks and lending institutions.

More than 210,000 buy-to-let mortgage holders will come to the end of fixed-rate deals of all lengths in 2024, according to UK Finance data.

Figures also show that more than 35,000 landlords face a second blow from rising interest rates. This group remortgaged for two years in 2022, hoping that rates would be falling by the time their deal came up for renewal.

However, investors who remortgaged with two-year fixes in 2022 will instead be hit by a second wave of rate pain through most of 2024 even as buy-to-let mortgage rates fall, economists have warned.

The average rate on a two-year buy-to-let mortgage today is 5.95pc, according to Moneyfacts. This is down from a peak of nearly 7pc over the summer but still far higher than the rates available 18 months ago, when the average two-year fix was less than 4pc.

Most borrowers who took out two-year fixes in the first nine months of 2022 had already moved onto higher rates. The Bank of England began raising interest rates in December 2021 and rises had started to filter through into higher buy-to-let mortgage rates by early 2022.

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