High interest rates and inflation, has led 67% of property investors to say they are “concerned” about rising finance costs, according to a study by Finbri.

Despite the cut of the Bank of England base rate by 0.25% to 5% earlier this month, these benefits are on the whole, limited to those with variable-rate mortgages, says the bridging lender, or those in a position to remortgage, “leaving many investors facing high borrowing costs”.

Landlords are worried about the effect of interest rates and inflation on their finance costs, the poll says.

In 2019, the average BTL mortgage rate offered to landlords was 3.5%. However, some lenders offered rates as low as 1.40% and 1.99%, the report says.

Those figures were before the pandemic, but due to high inflation and 14 Bank’s base rate hikes in a row, the average fixed BTL rate stood at 5.45% at the start of August.

The survey points out that inflation “bites into purchasing power and drives up costs for essential property-related expenses”.

It says that 77% of investors classed this as “a significant ongoing worry”.

The study points out that general property maintenance and refurbishment costs have risen by 14% since 2021, due to increased material and labour costs.

It adds that the number of new BTL loans issued in the first quarter of 2024 fell by 16.7% compared to a year ago, “indicating an existing cautious lending environment”.

The survey says the Bank’s rate cut has affected landlords in several ways.

It points out: “Firstly, it is expected to lead to lower mortgage costs, but only for those with variable-rate mortgages or those not locked into a fixed term or in a position to remortgage now.

“This can provide immediate relief in terms of lower monthly payments, improving investors’ cash flow.

It adds: “For those considering new property purchases, the lower base rate will result in more favourable mortgage borrowing, making it an opportune time to secure financing, which may mean more property transactions from investors.

“However, the impact on fixed-rate mortgages is less direct, and investors with existing fixed-rate deals won’t benefit immediately from the rate reduction.”

Alongside the base rate, investors will also consider the state of property values and rental yields.

It points out that this month the latest Nationwide House Price Index recorded a 0.3% rise in July, leading to an annual growth rate of 2.1%.

The study adds that the average rental yield in the UK in July is around 5.37%. At the beginning of 2023, the average rental yield was closer to 4.5% to 5%, depending on the region.

Finbri founder Stephen Clark says: “Property investors have seen financing costs skyrocket over the past five years and the challenges for the private rented sector remain significant. “Clearly any interest rate cut is undoubtedly welcome news, however, the August 0.25% reduction alone is unlikely to markedly subdue property investor financial concerns.”

Finbri polled 600 UK property investors.