A new survey of 1,001 UK renters by Finbri discovered that if, as predicted, the base rate rises to 4.5%, over 50% of landlords are set to increase rents to cover additional expenses. This means it’s becoming more likely that tenants will be unable to afford their monthly rent. And renters are worried.
73.93% of UK tenants are Strongly concerned (36.86%) or Concerned (37.06%) about rent increases with 27.07% experiencing anxiety due to renting.
As well as 52.75% of landlords saying they’ll raise rents should rates continue to increase, 44.66% said they would look to sell their investment properties – landlords and renters are being impacted and both are feeling the strain of the rate increases.
As Stephen Clark, from bridging loan broker Finbri, comments, “This latest rate hike could well signal the tipping point for landlords and if so, it’ll be worrying times for their tenants. With landlords looking to raise rents or sell, tenants are rightly concerned.”
The Impact of the Interest Rise on Landlords
A rise in interest rates will increase variable mortgage costs or impact landlords coming to the end of a fixed-rate mortgage deal. The increasing rates are likely to make it more expensive for landlords to buy property, more expensive to keep property, and is likely to lead to a decrease in the number of rental properties available.
- Increase in buy-to-let mortgage rates – Landlords due to refinancing will experience a limited number of BTL deals and increased mortgage rates.
A variable buy-to-let mortgage’s interest rate could result in increased monthly mortgage payments for landlords – the interest rate won’t impact owners of fixed-term leases at this time. However, if the base rate keeps rising, the cost of fixing a new arrangement will likely increase.
The Impact of the Interest Rate Rise on Tenants
As landlords look to exit the buy-to-let market, for renters, an increase in interest rates may mean fewer rental housing options and higher rental prices. This would make it more difficult for renters to find affordable housing, particularly if they have limited financial resources. Where higher interest rates make a BTL investment no longer financially viable for the landlord, they may consider selling the property without a sitting tenant thus evictions may increase.
Tenants in properties owned by private landlords have faced the highest rise in rent since comparable records began seven years ago, according to the Office for National Statistics (ONS). With a combined 73.92% of renters in the UK Strongly concerned (36.86%) or Concerned (37.06%) about rent increases and 31.07% Concerned about property security, the reaction of landlords to the increasing base rate will have a huge impact on the lives of their tenants.
The current economic climate is causing both landlords and tenants to feel the strain of the interest rate increase, as landlords look to exit the buy-to-let market and tenants face higher rental prices and fewer housing options.
To help mitigate the impact of rising interest rates on landlords and renters, the government may need to implement policies that help make housing more affordable. This could include tax credits for landlords, rent control policies, or the development of more affordable housing. Unfortunately, the current approach of the UK government appears to be more combative, with successive regulation and tax changes that seek to strongarm landlords out of the market. The carrots dangled over the past 20 years to grow the BTL sector seem to have been replaced with a very large stick.