Buy-to-let investors have been snapping up properties and expanding their portfolios as mortgage rates fell, new research reveals.
Despite government policies aimed at cooling the buy-to-let market, landlords were riding a wave of confidence, fuelled by cheaper borrowing costs.
Analysis by Octane Capital shows the average buy-to-let mortgage rate plummeted from 5.99% in September 2023 to just 4.33% in August.
This significant drop means landlords are enjoying lower monthly mortgage repayments, making it more affordable to own and manage rental properties.
Landlords Remain Confident Despite Government Policies
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.”
How Much Have Mortgage Repayments Fallen?
Octane’s data highlights the dramatic impact of falling interest rates on monthly repayments:
- December 2021: When interest rates began their upward climb, the average buy-to-let mortgage rate was a mere 1.70%. This translated to a monthly interest-only repayment of £286, or £827 for a full repayment.
- September 2023: After 14 consecutive interest rate rises, pushing the Bank of England base rate to 5.25%, monthly repayments had ballooned:
- Full monthly repayment soared by 67% to £1,382.
- Interest-only repayments skyrocketed by a staggering 274% to £1,071.
- August 2024: The recent drop in the average buy-to-let mortgage rate to 4.33% has brought welcome relief:
- Full monthly repayment now stands at £1,212 – a 12% decrease.
- Interest-only payments have fallen by 25% to £801.
Landlords Expanding Their Property Empires
This renewed affordability is reflected in the growing size of buy-to-let portfolios. Data from Pegasus Insight shows the average portfolio size has increased from 7.2 to 7.6 properties this year.
The East Midlands is a particular hotspot, where the average portfolio size has jumped by an impressive 2.5 properties.