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Borrowing Costs Drive Surge in Landlord Debt

Octane Capital, renowned for its specialisation in property lending, has unveiled research suggesting that average landlord debt, resulting from buy-to-let mortgage loans, has risen by 19% in the previous year.

Delving into the economic challenges faced by buy-to-let landlords in England & Wales, Octane Capital scrutinised the average count of properties and buy-to-let mortgages per landlord, as well as the cumulative mortgage debt for each.

Nationally, the amount owed from buy-to-let mortgages surged from £467,548 per landlord in Q1 2022 to £558,423 in Q1 2023, marking a 19% uptick. Driving this increase is a mounting dependence on borrowing. On average, each landlord now holds 6.7 buy-to-let loans, a rise of 12% from 6.0 in Q1 2022.

In a regional analysis, the West Midlands topped the list with a 49% spike in the number of loans held by landlords. This translated to a 33% growth in total debt from buy-to-let loans, making it the fourth highest surge across all regions. The South East and the East of England trailed, with their average number of loans per landlord growing by 49% and 29% respectively. Consequently, the total debt for these regions has shot up significantly, by 95% in the South East and 90% in the East of England.

London and the South West also witnessed a sizeable growth in overall debt by 78% and 26%. Conversely, the North East, Yorkshire and the Humber, and the East Midlands experienced more moderate growths. The North West and Wales, interestingly, saw a decrease in the overall amount owed, by 22% and 37% respectively, accompanied by a drop in the average number of loans held by landlords.

Jonathan Samuels, the CEO of Octane Capital, provided his insights:

“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.

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.

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 .”