Record number of landlords to leave rental market due to sky-high mortgage repayments

Posted 10th November 2023 by ctatax-admin

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.

Read the article on Mortgage Solutions

“An increasing number of landlords have said that are considering selling their properties because of rising costs, a property tax consultancy has found.
New research compiled by Cornerstone Tax revealed that 15 per cent of landlords said that they are thinking about putting their properties up for sale, as mortgage costs spiralling out of control.

Read: How an annexe could save you thousands on stamp duty land tax

The Bank of England has continued to raise interest rates since December 2021, and despite the base rate being paused in September it has still climbed up to 5.25 per cent, a 15-year high.

The rate rises have made a major impact on landlords who took out mortgages on buy-to-let schemes during the era of low interest rates in the 2010s, believing that their property would be a safe investment.

According to Cornerstone’s data, landlords have lost thousands as a result, with the average estimate as high as £7,500 this year alone.

This news comes on the back of last week’s Hamptons Monthly Letting Index, which revealed that UK landlords are collectively paying £15bn in mortgage interest annually.

This has risen by £4.3bn over the last 12 months – a 40% increase.

Supply and demand issue being created

David Hannah, the group chair of Cornerstone Tax, highlighted how the exodus of landlords from the property market has led to serious problems of supply and demand within the UK’s major cities.

Cornerstone’s data showed that 19 per cent of tenants have had to move out of rental properties on five occasions in less than five years, as landlords are forced to exit the market or pass record high mortgage costs onto those who are renting their dwellings.

As demand continues to outstrip supply within the market, 17 per cent of tenants have also admitted that they have lost out on a property that they wanted to rent in the last two years as a result of a bidding war.

More positively, Hannah argued that there is hope on the horizon for renters, as this year has seen some of the sharpest falls in house prices over the past 14 years.

Also the Bank of England’s decision last month to hold interest rates at 5.25 per cent has stabilised the mortgage market.

It has also been found that the majority of of the UK’s largest mortgage lenders have also started slashing their rates for first-time buyers, with Halifax offering five-year fixed rate mortgages at less than five per cent.

Hannah said: “Our data highlights a clear issue in the UK’s rental market. Many of these landlords took out mortgages on buy-to-let schemes during a period of sustained low interest rates; fast forward to 2023 and the pressure currently facing landlords is simply too much.

Read: Fifth of landlords selling due to increased costs

“Spiralling interest rates and the highest tax burden since the Second World War have forced thousands of landlords to sell up, which then puts further pressure on renters due to a lack of stock.

“We are generally seeing an exodus of landlords from the capital and South East, looking towards the North East of England instead. It’s a region that’s seen the highest growth in property prices in the last twelve months, with many seeing it as a much safer investment than the capital.”

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.