Landlords hit by higher costs as banks cash in

Private landlords face rises of hundreds of pounds in their mortgage payments each year as they bear the brunt of higher interest charges from banks. 

Mortgage brokers have reported a “significant increase” in buy-to-let mortgage costs since the Bank of England raised official interest rates from 0.5pc to 0.75pc last month. 

The best available two-year fixed rate has risen by 0.5 percentage points, double the increase to the Bank Rate, while the cheapest five-year fixed deal has climbed by 0.22 percentage points, according to the broker Private Finance. 

Chris Sykes from the company said: “While residential pricing has been rising regularly in anticipation of action from the Bank of England, buy-to-let rates have remained incredibly low. 

“We know some lenders are looking to grow their market share and it looked as if they were going to hold off increasing rates as long as possible. However, following the most recent rise, we have seen upward pressure on a lot of buy-to-let mortgages.”

The average two-year fixed deal has risen from 1.68pc in December to 2.19pc last week, according to Property Master, another broker. The rise means landlords paying back more than £800 a year extra on a typical £160,000 loan with a 40pc deposit. 

Angus Stewart of Property Master said recent increases in the Bank Rate had “well and truly fed through” to buy-to-let mortgages. Private landlords have felt the squeeze more acutely than their professional counterparts who invest via limited companies, which usually pay higher mortgage rates.

Mr Stewart said: “Landlords who hold properties in limited companies have seen less of a jump. Some loans with a 40pc deposit are looking more competitive when borrowed through a limited company than as a private landlord.”

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