Navigating Recent Mortgage Rate Changes: What London Buy-to-Let Landlords Need to Do Now

Mortgage Rate Movements: The Essentials for Landlords

In a noteworthy shift during mid-2024, Leek Building Society increased buy-to-let (BTL) mortgage rates by as much as 20 basis points (0.20%), affecting both regulated and limited company BTL products. Conversely, TSB and Atom Bank have slightly reduced some residential and commercial mortgage rates.

These rate adjustments signal a subtle but important recalibration in the lending landscape for landlords. While the increases from Leek BS may place upward pressure on borrowing costs, the reductions at TSB and Atom could offer refinancing opportunities for some.

Why This Matters for London Landlords

Higher BTL mortgage rates directly impact monthly repayments, squeezing cash flow and potentially reducing net rental yields. For London landlords — especially those operating smaller portfolios or single units where margins are already tight — even a 0.20% rate increase can significantly affect profitability.

On the other hand, landlords with existing loans at higher rates might find it worthwhile to explore remortgaging with lenders like TSB or Atom, who have lowered rates on certain products. However, product availability, eligibility, and fees vary, so due diligence is crucial.

Practical Steps to Manage the Impact

1. Review Your Current Mortgage Terms and Repayment Schedules

Immediately request updated mortgage statements or contact your lender to confirm if your current loans are affected by these rate changes. For fixed-rate deals, the impact may be minimal until the term ends, but variable or tracker mortgages could see immediate adjustments.

2. Recalculate Cash Flow and Rental Yields

Use updated mortgage costs to revise your cash flow models and yield calculations. This helps in understanding how the increased costs affect your bottom line and informs future rental pricing or portfolio decisions.

3. Explore Refinancing Options

If your rates have increased, consult mortgage brokers or directly approach lenders like TSB and Atom, who have reduced rates on some products. Compare all costs, including arrangement fees and early repayment charges, to assess whether refinancing is beneficial.

4. Adjust Rental Pricing and Tenant Communication

Given higher financing costs, you may need to review your rental pricing strategy. However, market conditions and tenant affordability must be balanced carefully. If considering rent increases, plan communications thoughtfully to maintain good tenant relations and comply with tenancy laws.

5. Monitor Ongoing Rate Developments

Mortgage rates can fluctuate further as economic conditions evolve. Sign up for updates from your lenders and trusted financial news sources to stay ahead of any additional changes.

Considerations by Landlord Profile

• Single-Unit Landlords: Margins can be tight; immediate review of mortgage terms and cash flow is essential.
• HMO Operators: Multiple mortgages may amplify the impact; prioritise refinancing and operational cost reviews.
• Portfolio Landlords: Diversification may mitigate some risk, but aggregate cost rises warrant portfolio-wide financial reassessment.
• Accidental Landlords: Seek professional advice to understand implications, as financing structures may be less optimised.

Next Steps

• Schedule a mortgage review meeting with your broker or lender this month.
• Update your financial forecasts using the latest mortgage rates.
• Plan any tenant rent discussions with clear rationale based on your revised costs.

How Rentals & Sales Can Support You

Our Landlord Intelligence Hub offers bespoke portfolio reviews, compliance audits, and pricing strategy consultations tailored to the evolving mortgage landscape. We can help you identify refinancing opportunities, optimise rental income, and ensure your portfolio remains financially robust.

Disclaimer: This article is for informational purposes and does not constitute financial advice. Landlords should consult qualified mortgage advisors or brokers before making borrowing decisions.