Will this mean further rental increases?
Six in 10 landlords expect to see their mortgage payments increase over the next year, according to the National Residential Landlords Association (NRLA).
The study, conducted by market research agency BVA-BDRC for the landlord group, found that while over a quarter of landlords said they plan to remortgage over the next 12 months, the majority, or 60%, of private landlords expect their mortgage repayments to go up.
With the Bank of England (BoE) opting to maintain the base interest rate at a 15 year-high of 5.25%, landlord investors across the UK are now paying £15 billion in mortgage interest on an annual basis, up 40% over the course of the last year, based on Hamptons data.
And with central bank governor Andrew Bailey stating that it is unlikely that the BoE will cut interest rates anytime soon, the NRLA said the buy-to-let market “is especially exposed to the impact of higher interest rates.”
Given that 82% of mortgages in the sector are interest-only compared to just 11% for owner-occupier mortgages, the BoE itself has warned that, in the near term, higher rents are likely, given rising mortgage costs and strong demand.
Despite higher rents, Savills finds that landlords’ profits are at their lowest level since 2007, indicating that rent increases are not a sign of profiteering. Rising rents largely reflect the need for landlords to cover the increased costs which they continue to face, the NRLA has stressed.
“Higher interest rates put continued pressure on renters, as landlords are simply unable to afford growing mortgage costs,” Ben Beadle (pictured), chief executive at the National Residential Landlords Association, said.
“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. It’s time to reverse course and develop pro-growth tax measures. Without them, it is renters who will continue to struggle as demand outstrips supply and rents go up.”
Removing the three-percentage point stamp duty levy on additional home purchases could result in the availability of nearly 900,000 new privately rented homes throughout the UK in the next decade, research by Capital Economics for the NRLA has found. This change, according to the modelling, is anticipated to generate a £10 billion boost to Treasury revenue over the same period, driven by increases in income and corporation tax receipts.
The NRLA is calling on the government to support the sector by scrapping tax hikes which have cut the supply of homes to rent and led to rising rents.
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