Almost two-thirds of private landlords expect to see their mortgage payments increase over the next 12 months, leading to higher rents.

NRLA research reveals that while more than a quarter of landlords plan to re-mortgage over the next 12 months, 60% expect their mortgage repayments to rise. The news follows confirmation from the Bank of England that the base interest rate will stay at a 15 year-high of 5.25%.

According to estate agency Hamptons, landlord investors are now paying £15 billion in mortgage interest on an annual basis, up 40% over the course of the last year.

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 according to the Bank of England. This compares with just 11% for owner-occupier mortgages.

HIgher rents

As a result, the Bank warns 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. Instead, rising rents largely reflect the need for landlords to cover increased costs.

The NRLA wants the government to support the sector by scrapping tax hikes which have cut the supply of homes to rent and led to higher rents. Chief executive Ben Beadle adds: “Higher interest rates put continued pressure on renters, as landlords are simply unable to afford growing mortgage costs. 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.”