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Majority of Landlords Forced to Increase Rents to Cover Mortgage Costs

A recent survey by Landbay reveals that a significant 76% of buy-to-let landlords have increased their rental prices over the past year, primarily to offset higher mortgage costs. The study highlights the financial pressures landlords are facing, with more than half (51%) citing mortgage payments as the main reason for the rent hikes.

Additionally, 20% of landlords reported that they raised rents following advice from their letting agents. Other factors contributing to the decision include property maintenance, repairs, and improvements to enhance Energy Performance Certificate (EPC) ratings, as mentioned by 8% of landlords.

Looking ahead, 71% of landlords anticipate the need to further increase rents if mortgage rates rise upon remortgaging, while 21% remain unsure of their future actions. Only a small fraction, 8%, stated they would not hike rents solely due to higher mortgage costs.

Regional differences are evident in the survey results. In the South (excluding London), a high 89% of landlords plan to increase rents, compared to 62% in the North. However, 35% of Northern landlords expressed uncertainty about future rent adjustments. The Midlands shows a similar trend to the South, with 78% of landlords indicating rent increases are likely. In London, the proportion is lower, with 65% of landlords considering rent rises and 10% unsure.

When it comes to the scale of rent increases, 65% of landlords would prefer to limit the hike to up to 10%. This includes 38% opting for a 6-10% increase and 27% capping it at 5%. Meanwhile, 20% are undecided, 10% would raise rent by more than 10%, and 5% have no plans for any rent increase.

Rob Stanton, Sales and Distribution Director at Landbay, explained the rationale behind these trends: “Higher mortgage rates when remortgaging is obviously a contributory factor to rent rises and is understandable as landlords need to cover their costs. For those landlords who haven’t or don’t intend to raise rent, it is generally because their mortgage costs are low or they have long-standing and/or good tenants they want to keep.”

This data from Landbay sheds light on the current landscape in the buy-to-let market, with landlords adjusting to the economic pressures by recalibrating their rental strategies.