Buy-to-let mortgage payments are rising at a faster rate than rents, research from Octane Capital has revealed.
The research showed that, across Great Britain as a whole, mortgage rates have risen by 13 per cent year-on-year, thereby outstripping the rental price growth of 9.9 per cent.
It explained this is closing the gap between mortgage and rental payments, as mortgage costs now average £982 per month, compared to £1,068 for rents.
Octane Capital CEO, Jonathan Samuels, commented: “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 year has undoubtedly been a tough one for landlords and renters - as neither has been able to escape rising costs.”
Geographical disparity
A geographical disparity was discovered in the research with mortgages rising at more than double the rate in Yorkshire and the Humber and the north east.
This signals landlords are feeling the pinch the most in those regions.
In Yorkshire, mortgage payments were found to have surged by 15.2 per cent year-on-year to £712.
Meanwhile, over the same period, rents have risen by 7.4 per cent to £826 meaning the gap between the two is closing.
Similarly in the north east mortgage rates have increased by 15.4 per cent to average at £547 per month.
This compares to a rental price increase of 7.6 per cent, bringing it to £636 per month.
Bucking the trend
However, the research also revealed that London is an outlier as rents in the area increased by 12.9 per cent year-on-year, exceeding a 11.4 per cent increase in mortgage payments.
As a result, London’s tenants pay £2,109 per month for a new tenancy, far exceeding the average mortgage repayment costs of £1,789.
Meanwhile in Scotland the government’s policy of controlling rents on existing tenancies appears to be having the opposite effect for new tenancies, the research suggested.
It explained Scottish tenancies are 15.8 per cent more expensive annually at £973, a bigger percentage increase than any other region in Great Britain.
This compares to mortgage costs of £643 per month north of the border, after rising by 12.4 per cent year-on-year.
Octane Capital specified that, while it’s true to say mortgage costs are rising at a faster rate than rental payments, it’s important to note that rising mortgage costs are coming from a lower base than rents.
The research compared rent increases versus the average BTL mortgage payments based on the average price for a new tenancy and the cost of a BTL mortgage with a 40 per cent deposit.
tom.dunstan@ft.com
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