Mortgage rate rises sees landlords increasing rents

Seven in ten (68%) landlords plan to raise rents if their mortgage rate goes up when they come to remortgage, according to a new survey. 

The mortgage platform, Landbay, revealed almost half (44%) of landlords said they expect to increase rent by 6-10% in the coming 12 months if their mortgage rate increases. Of those who intend to raise rents, 70% will do so for both new and existing tenants.

Almost one in five (19%) of respondents are unsure about their plans, 13% said they would not increase rent.

The main reasons against doing so were that the landlord was enjoying strong rental yields and wanting to keep hold of good, longstanding tenants.

‘The rental sector plays an essential role in the wider housing mix in the UK’

Paul Brett, Landbay’s managing director, intermediaries, said: “The rental sector plays an essential role in the wider housing mix in the UK.

“Landlords selling properties does no good for our housing sector as a whole, especially when demand continues to outstrip supply and high mortgage rates continue to push many to rent rather than buy.”

The ONS reports private rental prices paid by tenants rose by 4.2% in the 12 months to December 2022. Within England, the East Midlands saw the greatest annual percentage change in private rental prices (5%), while in London prices changed by 4%.

Increasing rent is just one of the topics tackled by Landbay’s latest quarterly survey, which aims to uncover the key challenges facing existing landlords and reveal their thoughts on the future of the buy-to-let market.

‘The only possible course of action is to pass this on to the tenant’

Mr Brett continued: “There’s no question mortgage rates have steadily improved in recent months, many landlords will still see a clear disparity when they come to remortgage.

“Much like private borrowers, landlords face a rate shock too, and for some, the only possible course of action is to pass this on to the tenant.”

He added: “However, with many of our respondents still reporting strong rental yields, there’s hope that landlords will be less inclined to raise rent. That’s especially true for those not looking to upset loyal and trusted tenants.”