Landlords Yet to Pass Higher Mortgage Costs Over to Tenants

24th April 2023

New research shows that the nation’s tenants could be facing a sharp increase in the cost of renting as landlords face little choice but to increase rental values in light of soaring buy-to-let mortgage costs and feel the brunt of market fluctuations.

The research also suggests that back in December 2021, the average cost of a buy-to-let investment would have seen landlords paying £942 per month as a full repayment, or £486 per month as an interest-only payment.

Fast forward to today and the same mortgage on the current average house price of £289,818 would require a full monthly repayment of £1,133, or a monthly interest-only payment of £703.

That’s a 20.1% increase in the average monthly cost of a full monthly repayment, equating to £190 more per month, or a 44.6% increase in the average monthly interest-only repayment adding £217 more to the monthly cost.

Despite this, further analysis suggests that, so far, tenants have yet to be hit with a rental increase in line with the higher cost of buy-to-let borrowing. Since December 2021, the average monthly cost of renting across the UK market has increased by just £124 per month. However, those who would have secured a more favourable rate prior to the first interest hike in December 2021 will be approaching the end of their fixed term this year, meaning tenants could be facing higher rents, with landlords left with little other choice to cover the higher cost of borrowing.

James Forrester, Managing Director of Barrows and Forrester, the agent responsible for the research, commented:

“As it stands, the nation’s landlords are yet to hand down the far higher cost of borrowing to their tenants and while rents have climbed of late, they haven’t increased at the same rate as the monthly cost of a mortgage.

This is partly due to the fact that many landlords will have secured a favourable rate on a fixed product before interest rates started to climb.

Unfortunately for the nation’s tenants, they are left with little choice but to recoup this higher cost via an increase in rents and so we expect to see sharp upward growth in the average cost of renting as the year progresses.”

For peace of mind that your rental income is in line with current market value, whist covering any increases you’ve faced due to mortgage rates, contact our Business Development Consultants.