Landlords hold their nerve in buy to let market as interest rates push mortgage repayments for UK property investors.

Landlords hold their nerve

Interest rate rises bite, but landlords hold their nerve.

Published 2007-06-01

Landlords hold their nerve A new Landlords Profitability Index shows that recent rate rises have had a slight impact on profits, with increased mortgage payments eating into rental income for Research from The Money Centre¹, shows that while four out of every ten landlords are still able to make sufficient profits from rental income to supplement their own income, a quarter are at break-even or even making a small loss each month.

However, most landlords see buy-to-let property as a long-term investment and seem unworried by this dip in profitability. In the short-term, acquisitions activity is on hold for many investors, with 18 per cent (down from 41 per cent) expecting to buy more property over the next 12 months. Most landlords are holding their nerve, with just one in ten saying they expect to sell their rental properties, down from one in four.

Lynsey Sweales from The Money Centre, one of the UK's largest specialist buy-to-let mortgage brokers said: "Recent rate rises may have put the squeeze on some investors, but the vast majority invest for long-term growth. On average, investors expect to hold their investments for more than 18 years and most are confident the value of their portfolio will increase over the next 12 months.

"Rental income is just one piece of the buy-to-let jigsaw. Rents tend to rise as interest rate increases put prospective homeowners off buying their own property, so short-term profitability should soon return to the sector."

Research sources:

1. Research findings based on BDRC's Landlords Panel: 518 interviews with a representative sample of privately letting landlords conducted between 7 and 16 February 2007.

The results of the next Landlords Profitability Index are due to be released in September 2007.

The Money Centre handled over £1.9 billion buy-to-let mortgages in 2006 - the company's most successful year yet. The company has over 140 consultants providing focus for portfolio landlords UK-wide. The company focuses heavily on providing guidance, service and expertise and is known as the ‘Harrods of the buy-to-let' industry by industry insiders (Financial Industry Gazette).