Buy-to-let: The Impact of New Mortgage Rates
/We have all seen the headlines in the broadsheets and television news announcing increases in mortgage payments and the impact it is having on households across the UK. But what is the impact of new mortgage rates on buy-to-let property investments and why is this a good time to invest or expand a portfolio of buy-to-let properties?
If you are thinking about a buy-to-let property investment, you may like to read our article ‘Which buy-to-let is right for you?’, where we highlight the main points and landlord responsibilities for three types of buy-to-let property, so you can decide which type of property investment is right for you and your personal financial circumstances.
Surge in demand for rental properties
Student Accommodation
The surge in demand for rental properties, especially in university towns, has resulted in higher rents with many students/parents prepared to pay extra for a decent standard of accommodation.
The availability of HMO student housing has declined at the same time as a slowdown in the building of new accommodation (PBSAs), so there are fewer properties available for rent while student numbers are growing,
This has meant students looking further afield and travelling to university, putting pressure on the wider property rental market, reducing the number of properties available for those unable or unwilling to secure a mortgage.
We explored some of the factors affecting the student rental market in our article ‘Investing in student buy-to-let property.’
If you would like to find out more about our buy-to-let student accommodation investment opportunity Vision@ Huddersfield, with an assured net rental return of 8% for the first three years, contact us today to learn more about this unique opportunity.
Holiday Accommodation
Holiday destinations are also facing a surge in demand for accommodation.
Following the pandemic, many people have chosen to holiday here in the UK rather than risk overseas travel.
If you would like to read more about the growth of the staycation, we explored why the UK staycation market is a sound investment in April’s blog.
With many landlords choosing the holiday rental market, where they can expect higher rental returns for short-term lets, it has led to a shortage of rental stock available for long-term lets to families or young professionals.
Squeeze on salaries
The impact of new mortgage rates on the housing market has led to a slowdown in sales, as fewer people can afford higher mortgage rates.
It has also impacted first-time buyers’ ability to get on to the property ladder, with many now considering their rental options.
The pressure on salaries was highlighted by an article published by Which? in July, where they compared monthly mortgage payments between July 2021 and July 2023.
Their comparison table showed that a mortgage of £100,000 would have seen an increase of £234 per month, while borrowing £400,000 resulted in an increase of £936 per month.
The increased cost has meant that many first-time buyers have been frozen out of the housing market, while those coming out of a fixed-rate term on to a variable rate mortgage are experiencing difficulties in meeting the higher payments.
When taken together with the high rate of inflation and other rising costs, these economic factors mean that more and more people are struggling to obtain an affordable mortgage, and they are turning to the rental market as a viable alternative.
The Government’s new requirements
New legislation planned by the government includes a requirement for all new rental properties to have an Energy Performance Certificate (EPC) rating of C by 2025, and existing tenancies by 2028.
This will put pressure on landlords with older properties, as they may find it difficult to cover the costs required for the improvements.
As well as the pending new legislation, it is easier to find tenants for energy efficient homes as we become ever more aware of the impact of how we live on the environment.
Again, this puts older properties at a disadvantage because they may be more expensive to heat, not suitable for low-carbon options or prohibitively expensive to convert.
Energy efficiency requirements could, therefore, mean that many landlords will simply sell their properties, reducing the number of rental options available.
On the plus side, this creates an opportunity for investors in new builds or property conversions that already incorporate eco systems and greener heating options. Our off-plan development, Brewery House, is a new-build project meaning it will have to meet current building regulations, and so it’ll be coming onto the market energy efficient.
The impact of new mortgage rates
When you take all the factors outlined above into consideration, now could be the perfect time to invest in a new or converted property finished to a high specification, that offers professional workers and couples a choice of apartments, whilst addressing all of these issues:
Residential accommodation suited to the needs of working professionals, rather than purpose-built student or holiday accommodation
Providing a high standard of accommodation but at a lower rental price point, for those unable to afford mortgages
Featuring the highest security, safety, accessibility, and energy efficient heating and lighting systems to lessen the environmental impact of modern living whilst reducing running costs
‘Convenience’ features including sockets with built-in USB chargers and satellite points
Close to a town centre and with easily accessible transport links for commuting to larger cities
Will meet current build requirements for energy performance, removing the need for expensive updating for Energy Performance Certificates
Holmeshaw is, therefore, pleased to be able to offer investors just such an exciting opportunity with Brewery House@Burton on Trent.
Due for completion in autumn 2024, this high specification building conversion will see a former brewery turned into 61 one and two bedroom apartments across three floors.
Each apartment will be suited to modern living and conveniently situated just a few minutes’ walk from the town centre, the railway station, the Brewhouse Arts Centre, and Cooper’s Square Shopping Centre.
Burton upon Trent is currently a place to watch, attracting investment for town centre improvements, further education and transport infrastructure.
In 2022, it ranked second out of 28 Staffordshire communities for the quality of life it provides, central to which are the River Trent and its countryside setting.
However, it is still only ten minutes to Derby and twenty minutes to Birmingham via train, so it is the perfect location for those with jobs in the city.
The financials
Brewery House at Burton on Trent
The scale of investment in the regeneration of Burton upon Trent is appealing for property investment, as is the success of region, which is bringing new workers into the area who all need good quality accommodation.
So, how do the financials stack up?
Investments start at £139,500
No ground rent
999 year leasehold
An investment of £169,995 returns 7% gross rental income per annum
As well as a great rate of return, Holmeshaw offers a fully managed proposal for this investment opportunity at Brewery House@Burton on Trent. A local independent and experienced letting company can offer up to a ten year agreement, thus removing all the worry of having to manage the property yourself.
Contact us today to discover more about this exciting buy-to-let property investment opportunity in Burton upon Trent or any of our new developments so we can explain how the impact of new mortgage rates has presented opportunities for those looking to invest. And, for more about why Holmeshaw Property Investments offer investment certainty in uncertain times, please read our recent blog.
Holmeshaw encourages investors to seek advice from a financial advisor before deciding to invest their capital into property or any other form of investment.
