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Is Britain's buy-to-let bubble about to burst? Rising mortgage payments could push landlords to sell

Updated: Sep 23, 2022

Is Britain's buy-to-let bubble about to burst? Is now the right time to buy to let?

What should your next steps be?

Well, whilst researching for this blog I found an article from James Robinson which pretty much hit the nail on the head and I have copy and pasted the best parts here for your reading pleasure.

At the end of this blog is the link to their page which is well worth a read.

  • New figures show as many as 20 percent of landlords are considering selling up some or all of their properties

  • They are being persuaded due to rising borrowing costs sparked by recent rises in interest rates, say experts

  • Landlords also face increases in the cost of their insurance and maintenance fees, according to lettings chiefs

  • It comes as new figures released today show how property prices fell month-on-month for first time in a year

  • Experts say landlords and second home owners may to look to sell while homes are 'at the top of the market'

Britain's buy-to-let bubble could be about to burst due to a perfect storm of rising interest rates, cost of living pressures and the possibility of falling property prices, experts have today told MailOnline.

Soaring borrowing costs sparked by rising interest rates are thought be putting landlords - particularly those with smaller portfolios - off the buy-to-let market.

Experts say landlords are also facing inflation on the cost of repairs, rising insurance premiums and increases in maintenance fees - all of which are increasingly making the rental market less attractive.


And new regulations aimed at cracking down on buy-to-let landlords - as well as second home owners - are also further persuading property owners to sell up.

New figures show as many as 20 percent of landlords are now considering flogging some or all of their property portfolios.

Holiday home owners could also look to sell-off their second homes 'at the top of the market' - amid forecasts that the property market is set to slow in the coming months.

Experts say a flood of former buy-to-let properties on the property market could be good for first-time-buyers - amid a scramble for small and new-build properties and a widening divide in the wage to property price ratio.

It also comes after one of Britain’s biggest building societies, Leeds Building Society, announced it would be restricting mortgage offers on second homes in an attempt to help more buyers get on the property ladder.

But experts warn rising interest rates will likely see the end of 'ordinary' Britons taking part in the buy-to-let market, leaving renters at the mercy of much larger corporate landlords, who the say will be able to better absorb the extra costs.

On top of that, some warn a smaller letting market could lead to an increase in rent for millions - with the average rental bill already increasing by more than 9 per cent in the last year.

One expert, Jonathan Rolande, from HouseBuyFast, told MailOnline: 'I think this is in some respects, the end or at least the beginning of the end, of Britain's buy-to-let boom, particularly for smaller 'Mum and Dad' type landlords.



Rising borrowing costs sparked by rising interest rates are thought be putting landlords - particularly those with smaller portfolios - off the buy-to-let market. On top of that, experts say landlords are now facing inflation on the cost of repairs, rising insurance costs and increases in flat-block maintenance fees, that are increasingly making letting less attractive. Pictured: Graphic from House Buy Fast


'After all of the costs involved, landlords are usually working on a profit margin of around 4 per cent.

'But with rising interest rates, if they hit something like 2 per cent or 2.5 per cent, then many landlords are going avoid the aggro and be encouraged to sell up and put the money in the bank.'

Mr Rolande believes smaller landlords, with one of two properties, will be the ones most likely to sell up.

'These landlords are often show more care towards their tenants and are much more approachable.

'I think larger commercial landlords will stay and they can be a lot more unsympathetic when it comes to things like personal circumstances or late payment - if you don't pay rent that's that.'

Mr Rolande also believes a slowing of the property market in the coming months could see landlord rush to sell-up.

New figures today revealed how average house prices in the UK fell by 0.1 per cent month-on-month from June to July - a £365 fall in cash terms - after reaching record highs in June.



Average house prices in the UK fell by 0.1 per cent month-on-month in July - a £365 fall in cash terms - according newly released data from Halifax. It means a typical UK property now costs £293,221

Mr Rolande also believes the potential for property price rises to slow, or even fall, in the coming months could see a rush to sell-up for some landlords. Rent costs have increased as much as 13 per cent in Greater London in the last year



Figures from HomeLet show how different areas of the country have seen different increase in rent prices in the last year, with Greater London the highest at 13.6 per cent and the east of England seeing the lowest percentage annual increase



In London, the largest annual percentage increase in rent was in Tower Hamlets, east London, followed Westminster, central London and by Barnet, in north west London


Experts say activity in the housing market has 'softened' in recent months, and that a 'slowdown' on house prices - which exploded during the Covid pandemic - has been 'expected for some time'.


Mr Rolande believes owners of second homes - another market which boomed during the pandemic as Londoners splashed out record amounts on seaside homes to take advantage of working from home - may now try to sell up while property prices are at a peak.

He said: 'I think there will be people trying to sell up while properties are at the top of the market.


'Of course, second home owners are often more likely to be wealthier, and without a mortgage, or those whose holiday homes in Cornwall and Devon have been in their families for generations. But they may still try to sell them now.'

The UK buy-to-let market, which initially boomed in the wake of Margaret Thatcher's property ownership reforms in the late 1980s, has boomed again in recent years, due to a sustained period of low interest rates following the 2008 Credit Crunch.

Interest rates as low 0.25 per cent in recent years, plus an increase in banks offering low-deposit mortgages, have triggered those with savings to look at new ways to make better returns.

Only in June last year did that flip back - to mortgages being more expensive than renting - for the first time in six years.


Meanwhile, property prices have boomed over the last decade, with low interest rates often making monthly mortgage repayments cheaper than renting.

The increase demand for property ownership, coupled with a low housing stock, has seen property prices rise on average by around 4.3 per cent in the 10 years from 2011 to 2021 - and nearly 6 per cent in London.


And the Covid pandemic and its continuing impact has pushed property prices even higher, on average by 12 per cent in the last year, according to figures by Halifax.

But that could soon slow, according to experts. Average house prices fell by 0.1 per cent month-on-month in July - a £365 fall in cash terms - according newly released data from Halifax.

It means a typical UK property now costs £293,221, according to the bank.

The small but potentially significant slow in the market - the first since June 2021 - comes after average UK house prices reached a record high of £293,586 in June, Halifax say.

Experts say activity in the housing market has 'softened' in recent months, and that a 'slowdown' on house prices - which exploded during the pandemic - has been 'expected for some time'.

They warn that increased borrowing costs, sparked by recent rises in interest rates, are now adding to the squeeze on household budgets against a backdrop of 'exceptionally high' house price-to-income ratios.


It comes as yesterday The Bank of England pushed up its base rate by 0.5 percentage point rise – the biggest increase in 27 years – in a bid to control spiralling inflation.

Its base rate, which banks use to set mortgage costs, is now at a 13-year high of 1.75 per cent, up from 1.25 per cent.


The rise is the sixth consecutive increase since December. And it has sparked warnings of a potential 'mortgage time bomb' for millions of mortgage owners, as their fixed-rate loans come to an end.


The slowing of property price rises, plus the increase in borrowing costs for buy-to-let landlords with a mortgage, are two of the main reasons why experts believe homeowners might now look to sell up.

And, according to figures by HomeLet, as many as one in five landlords could now look to sell up some or all of their buy-to-let portfolios.

According to HomeLet & Let Alliance chief executive, Andy Halsted, the figure is as high as 22 per cent for landlords in London.

He said: 'This month's figures paint a picture of a rental market that is struggling to meet the needs of renters or landlords, with spiralling prices a bad sign for both parties.

'One of the main factors leading to rising rent prices is a lack of supply on the market to match demand.

'This problem could worsen if landlords continue to leave the market, leaving a rapidly shrinking supply of available rental properties.

'The issue is reflected by the overall findings from our recent Landlord Survey, where 18 per cent of all landlords that we spoke to said that they expect to reduce their portfolio or leave the sector entirely in the near future – this figure rises higher to 22 per cent for landlords based in London.


The same survey revealed that four out of five renters (78 per cent) are worried about how they will pay their rent.

'A market too volatile for landlords to rely on receiving rents due, and properties too expensive for renters to cope with, is clearly unsustainable.'


It comes after one of Britain’s biggest building societies announced last month that it was restricting mortgage offers on second homes in an attempt to help more buyers get on the property ladder.

Leeds Building Society said funding second properties was not ‘compatible with our purpose to put home ownership within reach of more people’.

The member-owned lender reassured customers it would use the spare capacity to renew its focus on other sectors, such as affordable housing and support for first-time buyers.

It will keep lending on buy-to-let properties and holiday homes, but only if they have people staying in them for the majority of the time.

‘We’ve taken this decision after a great deal of thought as we don’t believe support for second homes is compatible with our purpose to put home ownership within reach of more people,’ said Richard Fearon, chief executive of Leeds Building Society.

‘Second homes reduce the number of properties available for people to live in at a time when there’s a wide consensus that housing supply in the UK is inadequate.’

He added that ‘any home other than a main residence usually lies empty most of the time, which does not serve the local community or contribute to the local economy’.

Leeds Building Society, Britain’s fifth-biggest mutual, usually lends several million pounds every year to fund second-home purchases. According to the English Housing Survey, there are 495,000 second homes in England.

But the debate over whether homeowners should be able to buy extra property has been reignited in recent months, as the cost of living crunch has laid bare the divide between those with spare savings and those who are struggling to make ends meet.

Activity in the housing market is being sustained by those who already own property or managed to build up savings during the pandemic.

The rate of home ownership in England had slipped from 71 per cent in 2003 to 65 per cent in 2019/20.

Last month, the Welsh government gave sweeping powers to councils to ‘set a ceiling’ on the number of second homes which can be bought in their area.

It comes amid a wider row over second homes, particularly in coastal areas, after thousands were snapped up during the pandemic.

Furious locals have accused those who bought second homes in areas such as Cornwall, Devon and Wales of pricing out locals from the area and turning them into 'Chelsea by Sea'.

Covid lockdowns and the rise of flexible working saw a surge of Londoners travelling outside of the capital, spending a record £54.9bn on properties outside the city last year - the highest value on record by far.


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