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Buy-to-let could become unprofitable in seven out of 10 towns and cities by 2020 if interest rates were to rise by 2.5 percentage points, according to data obtained by Telegraph Money.

Using current house price, rent and mortgage data, the figures showed that landlords with 40pc equity in their property and a mortgage currently fixed at 3pc for three years would be making an average annual loss of £325 by 2020.

The data, provided by Property Partner, a “crowdfunding” website, covers more than 100 of Britain’s largest towns and cities. At present, landlords’ average net profit is calculated at £3,419, falling to £2,555 by 2020 even if mortgage rates remained at 3pc, thanks to the phasing out of mortgage interest tax relief. A 2.5 percentage point rise in mortgage rates would be enough to produce the £325 loss.


Investors in some towns face bigger losses. In Salisbury, landlords currently make an average annual profit of £2,200, the data shows.

By 2020, with both a cut in mortgage tax relief and a 2.5 percentage point rate rise, they would make a loss of £2,984 a year – a swing in fortune of £5,184.

In Cambridge and Winchester the reversal in fortunes would be even greater. In Cambridge the average profit today is £4,257 but would swing into the red with a £2,418 annual loss in 2020. In Winchester an annual profit today of £5,835 would be wiped out and landlords would face an annual deficit of £2,169. Fewer than one in five towns and cities will offer a net rental profit of more than £100 a month by 2020, according to the data.
 
How profits will be hit


 
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