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Survey Reveals Divergence in UK Landlords’ Response to Rising Mortgage Costs

A recent survey conducted by Octane Capital, a financial firm, suggests that not all landlords in the United Kingdom are passing on the burden of higher mortgage costs to their tenants. This finding comes in the midst of changing dynamics in the housing market, as mortgage rates continue to surge while rental prices also exhibit steady growth.

Comparing the average rent for new tenancies with Buy-to-Let (BTL) mortgages requiring a 40 percent deposit, Octane Capital observed that mortgage rates have increased by 13 percent year-on-year, outpacing the 9.9 percent growth in rental prices. This trend has contributed to a narrowing gap between mortgage and rental payments, as mortgage costs now average £982 per month, compared to the £1,068 monthly rent.

However, regional disparities emerge within this overarching pattern. Notably, the regions experiencing the most pronounced divergence between mortgage and rental costs are Yorkshire and the Humber, as well as the North East, where landlords are facing the most significant financial challenges. In Yorkshire, mortgage payments have surged by 15.2 percent year-on-year, reaching £712 per month, while rents increased by 7.4 percent to £826 over the same period. A similar trend is observed in the North East, where mortgage rates have risen by 15.4 percent, averaging £547 per month, compared to a 7.6 percent increase in rental prices, bringing them to £636 per month.

In contrast, London departs from the general trend, with rents experiencing a 12.9 percent year-on-year increase, outpacing the 11.4 percent rise in mortgage payments. This discrepancy results in tenants in the capital paying significantly higher rents of £2,109 per month for new tenancies, compared to an average monthly mortgage repayment cost of £1,789.

Scotland, too, demonstrates a unique dynamic in the housing market. The government’s policy of rent control on existing tenancies appears to have an unexpected effect on new tenancies, which have become 15.8 percent more expensive annually at £973 per month, marking a higher percentage increase than in any other region. In contrast, mortgage costs in Scotland have risen by 12.4 percent year-on-year, reaching just £643 per month.

The survey’s findings underscore the evolving landscape of the UK rental market, with landlords in different regions responding to rising mortgage costs in diverse ways. The implications for tenants and the broader housing market remain subjects of ongoing scrutiny.