In a recent survey conducted by the National Residential Landlords Association (NRLA), it has been revealed that nearly two-thirds of private landlords anticipate an increase in their mortgage payments over the next 12 months. The association has issued warnings that this trend is likely to contribute to a surge in rental prices across the UK.
Research commissioned by the NRLA indicates that while more than a quarter of landlords are planning to re-mortgage within the next year, a substantial 60% expect their mortgage repayments to rise. This revelation coincides with the Bank of England’s announcement confirming that the base interest rate will remain at a 15-year high of 5.25%.
Hamptons’ data highlights that landlord investors nationwide are currently shelling out a staggering £15 billion annually in mortgage interest, marking a significant 40% increase over the past year.
The buy-to-let market is particularly vulnerable to the impact of escalating interest rates, given that 82% of mortgages in this sector are interest-only, as reported by the Bank of England. In contrast, owner-occupier mortgages with interest-only terms account for a mere 11%. The Bank has cautioned that, in the short term, rising mortgage costs coupled with robust demand are likely to result in higher rents.
Contrary to assumptions of profiteering, Savills’ research reveals that landlords’ profits are at their lowest levels since 2007, indicating that rent hikes are driven by the necessity to offset growing operational costs.
The NRLA is urging the government to support the rental sector by eliminating tax hikes, which it claims have significantly reduced the supply of available rental properties and contributed to escalating rents.
Ben Beadle, Chief Executive of the National Residential Landlords Association, commented on the situation, stating, “Higher interest rates put continued pressure on renters, as landlords are simply unable to afford growing mortgage costs. Ministers need to accept that tax hikes on the sector have also played a major role in the affordability challenges we now see across the rental market.”
Beadle further emphasized the need for pro-growth tax measures to address the imbalance in supply and demand, asserting that failure to do so will result in continued struggles for renters.
Research conducted by Capital Economics for the NRLA suggests that the removal of the 3-percentage point stamp duty levy on additional home purchases could potentially lead to almost 900,000 new private rented homes becoming available in the UK over the next decade. The study further proposes that such a policy change could result in a £10 billion boost to Treasury revenue through increased income and corporation tax receipts over the same period.