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Landlords Tackle Rental Increases in Response to Surging Costs

The escalation of rental prices has become a stark reality, with an overwhelming majority of landlords opting to increase rents, often in response to their own mounting mortgage costs. According to new research conducted by Landbay, 18% of buy-to-let landlords have stated they would abstain from raising rents, even if their mortgage rates were to spike when remortgaging.

A similar proportion of landlords (21%) remain undecided on their course of action, while an undeniable majority of 61% have indicated that they would indeed hike up rents. The research also unveiled that three quarters (76%) of landlords admitted to having increased rents over the past year. A notable 51% cited escalating mortgage costs as the primary rationale behind their decision, while a quarter (24%) were influenced by the recommendations of their letting agents.

Other factors contributing to this trend include covering costs associated with property maintenance and repairs, dealing with tax increases or higher energy bills, and the prevalent practice of routine annual rent increases. When asked about the expected percentage of the increase, 38% of the landlords predict a rise between 6% and 10%. Another 27% suggested a more conservative increase of no more than 5%.

For landlords who currently resist increasing rents, their rental income is reported to be sufficient to cover their mortgage and other expenses. Nevertheless, some are barely breaking even and have chosen to bear the burden rather than risk losing valuable tenants. Others are biding their time, postponing the rental increase for as long as financially feasible.

Paul Brett, Managing Director, Intermediaries at Landbay, reflected on the situation, stating, “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.”

He continued, “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%.”

He concluded, “In fact, we are seeing more landlords opting for two-year terms, which is why we have also launched two-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.”