Mortgage rates have started moving higher again after a period of reductions, giving landlords another reason to review the numbers behind their rental properties. Moneyfacts reported that the average new mortgage rate increased from 5.47% at the beginning of July to 5.59% at the start of August, while average two- and five-year fixed rates rose to 5.63% and 5.66% respectively.
For landlords, the important question isn't simply whether mortgage rates are rising. It's whether your property would still deliver the return you expect if your borrowing costs change.
That makes cash flow, rental yield, mortgage costs and overall return increasingly important when reviewing a buy-to-let portfolio.
Why Are Mortgage Rates Rising Again?
After three consecutive months of reductions in average fixed mortgage rates, lenders reversed course in July.
Moneyfacts reported that rising swap rates and renewed inflation concerns contributed to lenders increasing rates. The average shelf life of a mortgage deal also fell to just 11 days, showing how quickly lenders are repricing products.
The wider buy-to-let market has also seen renewed rate increases. Which? reported that recent BTL mortgage rate cuts were short-lived, with average fixed-rate buy-to-let mortgages at 5.47% on 1 August.
For landlords, this creates a useful reminder: a property's profitability can change even when its rental income and market value haven't.
How Do Higher Mortgage Rates Affect Buy-to-Let Returns?
Mortgage interest is one of the biggest costs landlords need to consider when assessing the performance of a leveraged property.
When borrowing costs increase, the effect can be felt across the investment:
A property that looked attractive when purchased at a lower mortgage rate may produce a very different result when the financing is reviewed.
That's why landlords should avoid judging an investment purely by its current rental income or property value.
The relationship between income, debt and expenses provides a much clearer picture of whether a property is performing well.
When Should Landlords Review Their Property Returns?
A mortgage renewal is an obvious time to reassess a property's finances, but it isn't the only one.
Landlords should consider reviewing their numbers when:
Regular reviews can help landlords spot changes before they have a major impact on the wider portfolio.
For example, a property may still generate positive rental income but produce a significantly lower return once a new mortgage rate is taken into account.
Is Rental Income Enough to Measure Property Performance?
Looking at rental income alone can give an incomplete picture.
A property generating £1,500 a month in rent may appear attractive, but landlords also need to consider mortgage interest, insurance, maintenance, management costs, compliance expenses and potential void periods.
This is why metrics such as rental yield, cash flow and return on investment can be more useful when assessing whether a property is genuinely performing well.
Landlords should also consider how changes in one area affect the overall investment.
For example, a higher property valuation may increase equity, while a higher mortgage rate could simultaneously reduce monthly cash flow.
Looking at these figures together gives landlords a more complete view of their portfolio.
How Can Landlords Stress-Test Their Property Investments?
One useful approach is to look at how a property performs under different financial scenarios.
Rather than calculating returns based only on today's mortgage rate, landlords can consider what happens if:
This doesn't predict what will happen, but it can show how sensitive an investment is to changes in its underlying costs.
For landlords considering a new purchase, this can be particularly useful. A property that only works when everything goes according to plan may carry considerably more risk than one with stronger margins.
Review Your Property Numbers With Propell
Keeping track of property values, mortgage information, rental income and returns can become difficult when the information is spread across different spreadsheets and systems.
Propell brings key portfolio information together in one platform, helping landlords understand how their properties are performing.
With Live Mortgage Rates, landlords can view current mortgage products and compare rates across lenders, with options to filter by LTV, term and product type. Propell also lets landlords view valuation, potential rent and return metrics alongside mortgage rates.
Combined with bank-grade property valuations, portfolio insights and investment tools, this gives landlords a clearer picture when reviewing refinancing options or assessing a potential investment.
The goal isn't to predict where mortgage rates will go next. It's to make sure you understand how today's numbers affect your properties.
Don't Let Changing Mortgage Costs Catch You Off Guard
Mortgage rates can change quickly, and the latest movement is a useful reminder that property investment numbers shouldn't be treated as fixed.
A property that performs well today may look different when its mortgage is renewed, while a property that currently has limited cash flow may benefit from a change in rent, value or financing.
Regularly reviewing mortgage costs, rental income, property value and overall returns can help landlords make better-informed decisions about whether to hold, refinance, invest or restructure their portfolios.
Propell brings live mortgage rates, property valuations, rental information, portfolio insights and investment tools together in one place, helping landlords keep track of the numbers that matter.
Know your numbers. Understand your returns. Manage your portfolio with confidence.
Frequently asked questions
How do higher mortgage rates affect buy-to-let landlords?
Higher mortgage rates can increase borrowing costs and reduce the cash flow and overall return generated by a rental property. The impact depends on factors such as the mortgage balance, interest rate, rental income and other property expenses.
How can landlords check whether a buy-to-let property is still profitable?
Landlords should look beyond rental income and consider mortgage costs, operating expenses, rental yield, cash flow and overall return. Reviewing these figures together provides a more accurate picture of a property's performance.
Should landlords review their mortgage when their fixed rate expires?
Yes. A mortgage expiry is a good opportunity to review current rates and assess how a new deal could affect the property's cash flow and returns. Landlords should compare available options and consider the wider financial performance of the property before making a decision.
From Propell
Track your portfolio value and mortgage rates with Propell
Propell monitors your mortgages and surfaces better rates, so you can spot refinancing opportunities before your deal ends.
Ready to simplify your portfolio management?
Join landlords who've already streamlined their property operations with Propell.
