The average mortgaged landlord paid 37% of their rent on mortgage interest in August, up from a low of 24% in November 2021, according to Hamptons.

As increasing numbers face higher rates when their mortgage deals expire, UK investors are now collectively paying £15 billion in mortgage interest annually, up by 40% (£4.3bn) during the last 12 months and 58% (£5.5bn) since it bottomed out in November 2021.

The number on cheap mortgage rates will continue to dwindle and this £15bn figure is likely to continue rising, even if mortgage rates remain close to where they are today.

The average mortgage rate on outstanding landlord debt stood at 3.4% in August, says Hamptons, however, if this rate hits 4%, landlords’ total annual mortgage interest bill will reach £17.9bn. At average rates of 5%, it will hit £22.4bn and at 6% rates, £26.8bn.

Sold up

Hamptons says the number of outstanding buy-to-let mortgages has been falling since November 2022 as investors have either paid down debt or sold up.

Aneisha Beveridge (pictured), Hamptons' head of research, adds that even if there are no further rate hikes, rising interest payments have the potential to eat up just over half the amount mortgaged landlords receive in rent.

“For some investors, this will be unaffordable, and they will likely bow out, keeping upward pressure on rents,” she explains.

Its analysis suggests that most of the money extracted when landlords re-mortgaged wasn’t reinvested into buying rental homes.

“Rising rates will reverse this flow of finance, pulling cash out of the economy and back into the housing market as investors look to pay down their debt instead.”

The average cost of a new let in Great Britain was up 11.7% in September on the same period 12 months ago and now stands at £1,325pcm.

Reaction

Nathan Emerson (pictured), CEO at lettings agency trade association Propertymark, says: “The UK Government must recognise that many landlords are suffering at the moment with surging mortgage costs that have been compounded by recent tax changes as well as concerns about reforms to legislation in the private rented sector and the ability for landlords to get their property back when things go wrong.

"If the UK Governmentis serious about tackling rising costs in the private rented sector, then they must carry out a full review of all taxes impacting private landlords in order to understand the impact they are having and introduce pro-growth policies that bring down the cost of renting for both landlords and tenants.”

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