Landlords in financial crisis as rental loans disappear

Lenders have completed a record number of mortgage purchase deals overnight, with homeowners expected to sell as rates rise.

More than 500 trades disappeared from the market Tuesday evening, according to Moneyfacts, an analyst. This is more than double the previous record from April 2020, when the Covid shutdowns began.

Average fixed rates for five-year fixed buy-to-let contracts rose 0.04 percentage points overnight Tuesday, from 5.22% to 5.26%. These prices have recently exploded: at the beginning of the month, the average rate for a five-year fix was 3.25%.

Rising rates could force landlords to sell or raise rents. Half of homeowners depend on mortgages and mortgagees have already seen their profits erode.

Angus Stewart of Property Master, a broker, said there would be “increased pressure” on landlords as higher rates would reduce the profitability of rental purchases.

He added: ‘Homeowners’ costs will rise, so you could find yourself in a situation where someone has had a low interest rate and the cost of their mortgage could easily double. I think the challenge is that many tenants won’t be able to afford a rent increase and landlords won’t want to evict people just for the sake of it.

“We’re going to have some landlords choosing to exit the market because they can’t remortgage the rent they’re currently receiving, so we’ll have continued growth in the portfolio landlord sector as a result.”

Jeni Browne of Mortgages for Business, another broker, said: “Lenders are taking stock as the current market turmoil takes hold. As two- and five-year “swap rates” continue to rise, I expect mortgage rates to continue to rise as well.”

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