Recent research conducted by The Mortgage Lender indicates that approximately 40% of landlords holding residential mortgages, including those with fixed, tracker, or discount rates, are on the verge of renewing their mortgage terms within the next seven months to one year. This finding underscores the imminent financial decisions facing a considerable segment of property investors in the residential sector.
Moreover, the study highlights that this year alone, a substantial proportion comprising two fifths of landlords is poised to navigate the intricacies of mortgage renewals. Looking further ahead, an additional 41% of landlords are slated for mortgage renewals within the subsequent three-year period. This extended timeline reflects the ongoing financial planning obligations and considerations for landlords as they manage their property portfolios amidst evolving market conditions and regulatory landscapes.
Research indicates that the majority of landlords currently holding mortgages are predominantly situated on a five-year fixed mortgage plan, constituting 42% of the cohort. Following closely behind are landlords with a two-year fixed deal, comprising 21% of the total, while 15% are on Standard Variable Rate mortgages, with an additional 8% opting for a tracker mortgage.
The Mortgage Lender (TML) asserts that despite the decline in mortgage rates from their previous highs, landlords facing mortgage renewals within the next year are likely to encounter increased costs compared to their current or previous mortgage terms. This suggests that the prevailing market conditions may necessitate higher mortgage payments for landlords undertaking mortgage renewals, compared to what they might have experienced had they secured their mortgages a few years prior.
Among landlords preparing to renew their mortgage rates, the expectation looms of an average monthly payment increase of £615. This anticipated rise underscores the financial impact that mortgage renewals may have on landlords, necessitating careful consideration and planning amidst the evolving mortgage landscape.
In response to the impending rise in monthly expenses, a significant portion of landlords, accounting for 30%, are deliberating rent hikes for their properties. Concurrently, 23% have proactively integrated such adjustments into their financial forecasts, pre-emptively preparing for the inevitable surge in mortgage payments. A subset comprising 14% is contemplating divesting their property holdings, recognizing the potential financial strain posed by escalating costs and seeking to offload assets accordingly.
Moreover, a notable segment of landlords, constituting 14%, is actively exploring the conversion of their properties into Houses in Multiple Occupation (HMOs) to harness enhanced rental returns. This strategic pivot capitalizes on the burgeoning demand for shared accommodations, presenting an opportunity to optimize rental income streams in the face of mounting financial pressures. Additionally, a discerning 13% are strategically evaluating the feasibility of transitioning their properties into holiday lets, recognizing the lucrative prospects offered by the burgeoning short-term rental market. By embracing this approach, landlords aim to mitigate the impact of rising mortgage rates and sustain profitability amidst evolving market dynamics.
A TML spokesperson says: “With many due to remortgage this year, it’s important landlords speak to a broker to find the most suitable mortgage for them in order to maintain their property portfolios, particularly as costs of living challenges continue. Brokers can offer invaluable support and guidance to help provide a holistic view of what deals are most suitable for clients before they rush into any decisions.”
