Over 36% of Landlords Don’t Have a Mortgage
The world of property investment has seen a significant rise in the number of landlords in recent years. However, not all landlords are reliant on mortgages to finance their rental properties.
In the governments English Private Landlord Survey 2021, landlords who had bought or built their first rental property were asked about the sources of funding for this purchase or build. The findings showed that three quarters (75%) reported using a mortgage, 32% used personal savings and 8% used an inheritance.
A Surprising Statistic: Landlords without Mortgages
Recent discussions by BBC News has highlighted an interesting statistic about the property rental market. Out of approximately 5.5 million properties in the private rental sector, it is estimated that only about two million are mortgaged. This indicates that a substantial number of landlords own their rental properties outright, without the burden of mortgage debt.
In fact, the English Private Landlord Survey showed that while 57% of landlords had a Buy-to-Let mortgage, more than a third (36%) had no debt or borrowing at all.
A study done by the Council of Mortgage Lenders found that there was a concentration of retirees among the non-BTL landlords surveyed. Fewer that one in four BTL landlords were in the older age groups.
Landlords who have found themselves without buy-to-let mortgages may be in a more secure position when interest rates rise.
Unlike landlords with mortgages, they do not face the prospect of increasing monthly mortgage payments, leaving them relatively immune to rate hikes. This immunity can offer a
sense of financial stability and control over their rental income, even during economically turbulent times.
Impact on Tenants
On the surface, tenants may benefit from landlords who are not burdened by mortgages. The absence of rising mortgage costs should theoretically translate into landlords being less inclined to increase rental rates in response to interest rate hikes. This stability in rent prices could provide tenants with a degree of financial relief in an otherwise competitive rental market.
The Complex Reality
While some tenants may initially benefit from mortgage-free landlords, the situation is more intricate than it appears. Landlords face various other expenses apart from mortgage payments, including property maintenance, insurance, taxes, and other operational costs. As these costs rise, landlords might eventually need to adjust rental rates to sustain their rental businesses effectively.
Additionally, market forces play a crucial role in determining rental rates. As demand for rental properties increases and housing supply remains limited, the market rate for rent naturally rises. Therefore, the financial advantage gained by tenants from mortgage-free landlords might eventually be offset by the broader market dynamics.
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