An analysis by a national newspaper shows that investors purchasing buy to let properties with mortgages are likely to lose money within five years, irrespective where in Britain they invest.
The Daily Telegraph calculates that using current house price and typical rents from LSL, and mortgage data from brokers, landlords on a typical 75 per cent mortgage will be losing money each month by 2021 in ten out of 11 British regions, including London.
The newspaper hypothesises that by 2021, mortgage interest relief for landlords paying the higher rates of income tax will be very sharply reduced, while current fixed rate mortgages may be replaced with a variable rate mortgage. The presumption is that remortgaging to a more favourable rate may become more difficult as lenders become stricter.
“Paying interest at that higher rate, and now paying the higher levels of tax, landlords are breaking even each month in just five out of 11 regions. These are the West Midlands, Yorkshire and the Humber, the North East, the North West and the East Midlands” says the paper.
But the nighmare scenario, the Daily Telegraph says, is that if interest base rate by 2021 is two per cent higher than now, then variable rate mortgages could be expected to rise in tandem.
“Running landlords’ numbers again with a mortgage rate of 6.8 per cent finds positive returns in just one region: the North West.”