Landlords looking to raise funds through remortgaging could take advantage of rising rents in the capital, says Huy Le, Landlord Finance Specialist at Knight Frank Finance.
Average rent levels across London have hit a record high, presenting landlords with new opportunities to raise capital and reinvest in their portfolios.
Asking rents in the capital have risen beyond pre-pandemic levels to an average price of £2,142 per month, according to Rightmove. The property website said rents had increased by 10.9% in the fourth quarter of 2021.
“This rise is really being fuelled by an increase in demand as more tenants return to the city,” said Knight Frank Finance Landlord Finance Specialist, Huy Le. “Covid-19 caused a bit of an exodus as renters went in search of more green space when lockdown kicked in, but they’re fast-craving a return to urban life.
“As well as the obvious benefits this will bring landlords with properties in the city, it could also be a great opportunity for them to raise capital against their existing properties to improve and grow their portfolio.
“For buy-to-let mortgages, lenders use the rental calculation for a property to determine how much you can borrow, so landlords could take advantage of rising rents levels to maximise their borrowing power.”
Rents are rising in tandem with mortgage rates. In March, the Bank of England raised the base rate to 0.75%, its third consecutive hike.
“Landlords might want to consider whether now is the right time to remortgage to lock in a fixed rate, while interest rates are still low,” said Huy. “Even those who are subject to early repayment charges could be better off, with the charge potentially offsetting a future rise.”
He added, “It’s wise for landlords to talk to an adviser to assess what options work best for them. Though it’s likely rates will rise, there are some lenders in the market today – those who are not sensitive to the Bank of England base rate rise, for example – who are actually lowering their rates, so there are a number of great opportunities out there for landlords to take advantage of.”
If you’d like to discuss your options for growing or maximising your rental investment portfolio, speak to our specialist buy-to-let broker Huy Le, who will be able to help you identify the best financial approach for your circumstances.