Almost two in ten (18%) buy-to-let landlords in the UK have indicated they would not raise rents for their tenants in the event of their own mortgage rate increases when remortgaging, according to a survey by Landbay.
Conversely, 61% of landlords said they would raise the rent, and 21% remained uncertain about what course of action they would take.
The research shows that over the past year, a significant majority (76%) of landlords raised their rent, primarily to cover increasing mortgage costs, as reported by half (51%) of them. Meanwhile, 24% of landlords said they raised rents based on their letting agent’s advice.
Additional reasons for rental hikes included covering maintenance, repairs, increases in taxation or energy bills, and the habitual annual raise practiced by some landlords.
Of the respondents, 38% expect rent increases to range between 6% and 10%. In contrast, 27% said they would only raise the rent by a maximum of 5%.
For landlords currently refraining from increasing rents, their existing rental income sufficiently covers their mortgage and other expenses. However, some landlords are absorbing losses to retain good tenants, while others are merely postponing rental increases.
Paul Brett, managing director, intermediaries at Landbay, said: “Many landlords, whose mortgage interest rates are increasing, find themselves in the position of having no alternative than to put the rent up in order to cover their outgoings.”
“Mortgage costs obviously play a big part in landlords’ expenditure and there is a lot of remortgage activity this year. Our latest product development of like-for-like two-year fixed rate remortgages will help landlords, as the stress test we have to apply for affordability is based on pay rate plus 1%, instead of the more usual 2%.
“In fact, we are seeing more landlords opting for 2-year terms, which is why we have also launched 2-year discounted trackers with no early repayment charges. Borrowers can leave their options open with the opportunity to move onto another product at any time if mortgage rates improve.”
