The buy-to-let market has made a strong bounceback from the pandemic, with demand for rental accommodation soaring in many parts of the country, in particular student hotspots such as Manchester.

But while investing in buy-to-let still offers attractive returns, landlords are still facing rising costs, especially when it comes to paying mortgages.

According to new figures from Property Master, monthly costs on a typical five-year fixed rate buy-to-let mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £346 to £359 since the start of 2022, or £13 a month.

Meanwhile, monthly costs on a typical two-year fixed rate mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £351 to £365, or £14 a month.

Angus Stewart, Chief Executive of Property Master, described the increase in the cost of buy-to-let mortgages as “relentless”, and warned the current “turbulence in the money markets” is making it harder for some lenders to raise the funds.

This, he said, means there is “a fear that as well as higher mortgage costs, landlords may also face reduced choice”.

“Whilst it is true that buy-to-let mortgage costs may look low from an historical point of view, the increases we are seeing now come at a very bad time,” Mr Stewart commented.

“Increased taxes and regulation have already chipped away in recent years on the returns landlords can hope to make.”

But while the prospect of higher mortgage repayments lies in store for rental landlords, it’s far from doom and gloom in the buy-to-let mortgage market.

Number of BTL mortgages being issued is rising
Despite increases in the cost of buy-to-let mortgages over the last few months, it’s clear that people investing in rental property continue to see the market as a strong investment option.

According to new data from Knight Frank, 275,600 buy-to-let mortgages were issued in the year to February 2022. This includes 159,100 remortgages and means the number now stands at a six-year high.

Figures also showed that the number of new mortgages taken out by buy-to-let landlords rose to 110,000 during this period, up from 75,8000 in the year to February 2020. These were taken out both by investors expanding their portfolio and those entering the buy-to-let market for the first time.

The attractiveness of the market to new and existing investors has been fuelled partly by increasing rental rents, which have outpaced house price increases in some parts of the country.

In fact, Knight Frank has estimated that rental values across the country could go up by more than 17 per cent over the next five years, and the rate of increase could be higher still in the main hotspots of activity.

Meanwhile, latest figures from Hamptons show that more than one in ten properties sold across Great Britain between January and March 2022 were purchased by buy-to-let investors.

Landlords bought 42,980 homes during the first quarter of the year, which equates to 13.9 per cent of properties purchased during this period.

Nevertheless, Hamptons pointed out that tax and regulatory changes have prompted more landlords to sell up in recent years, and that there are now around 300,000 fewer privately rented homes in Great Britain today than in 2017.

So while the picture in the buy-to-let market is clearly mixed, it’s apparent that savvy investors can still earn healthy returns on the right properties in the right areas, which could more than make up for rising mortgage costs.