Introduction
In a recent study conducted by Octane Capital, it has been revealed that buy-to-let landlords in England and Wales have seen a staggering 19% increase in the amount of money they owe through buy-to-let mortgage loans over the past year. This surge in debt is a significant indicator of how the economic turbulence of recent months has affected landlords across the nation. In this blog post, we will delve into the key findings of this research and explore the implications for buy-to-let investors.
The Data
To gain a comprehensive understanding of the situation, Octane Capital analysed several key metrics. These included the average number of properties owned by each buy-to-let landlord, the average number of buy-to-let mortgages held by each landlord, and the average total amount of each landlord’s buy-to-let mortgage debt.
The Findings
The data paints a clear picture of the growing financial burden faced by buy-to-let landlords in England and Wales. Here are some of the key findings:
- Rapid Increase in Debt: The most striking revelation is that the total amount owed via buy-to-let mortgages has surged by 19% in just one year. This figure jumped from £467,548 per landlord in Q1 2022 to £558,423 in Q1 2023.
- Growing Reliance on Borrowing: The rise in debt can be attributed to a greater reliance on borrowing. The average number of buy-to-let loans held per landlord increased by 12%, rising from an average of 6.0 in Q1 2022 to 6.7 in Q1 2023.
- Regional Disparities: The West Midlands experienced the largest increase in the number of loans held, with a remarkable 49% surge in the past year. This resulted in a 33% increase in the total amount owed via buy-to-let loans, making it the fourth highest increase among all regions.
- Other Regions Follow Suit: The South East and East of England also saw a significant uptick in the average number of buy-to-let loans held per landlord, increasing by 49% and 29%, respectively. Consequently, both regions witnessed a drastic increase in the total amount owed via these loans, with the South East recording a 95% annual increase and the East of England a 90% increase.
- Mixed Results in Other Regions: While London and the South West also experienced substantial increases in total debt, with growth rates of 78% and 26%, respectively, the North East, Yorkshire and the Humber, and the East Midlands saw more modest increases of 3%, 2%, and 2%. Interestingly, the North West and Wales were exceptions, witnessing reductions in the total sum owed, with declines of 22% and 37%, respectively. Both regions also saw decreases in the average number of loans held per landlord at -16% and -3%, respectively.
CEO’s Perspective
Jonathan Samuels, CEO of Octane Capital, weighed in on the findings, stating, “The high cost of borrowing is clearly having a significant impact on buy-to-let landlords. The number of loans held has increased across the majority of the country, as has the total amount owed as a result of these loans.”
He continued, “While it’s clear that a lot of landlords are willing to saddle more debt in order to keep their operation moving, it’s inevitable that a significant number will either downscale their ambitions or jump ship entirely.”
Samuels also offered a word of advice to those who remain committed to the buy-to-let market, saying, “For those who are willing to stick it out and reap the benefits in the long run, there is a real opportunity being presented by the properties either offloaded or overlooked by others. While now might not seem like the best time to increase the size of your portfolio, being bold when others are meek can bring reap rewards in the long-term – especially now that mortgage rates have shown signs of easing.”
Conclusion
The research by Octane Capital paints a vivid picture of the challenges facing buy-to-let landlords in England and Wales. As debts continue to rise, landlords must carefully assess their financial positions and investment strategies. While the current landscape presents its share of uncertainties, opportunities may also arise for those who are prepared to navigate these turbulent waters with a long-term perspective in mind.