Many buy-to-let landlords have so far refrained from passing on extra costs to tenants despite feeling the squeeze from a stamp duty increase on property acquisitions and more importantly for many the capping of mortgage interest relief at 20% on tax on rental income, but many private tenants may now find that extra mortgage costs as a result of yesterday’s interest rate hike may now be passed on in higher rents.
Landlords who are on a tracker mortgage that matches any rise in the base rate will find that an extra 0.25% adds £12 a month to a £100,000 repayment mortgage and £25 on a £200,000 loan.
Alexandra Morris, managing director at MakeUrMove, commented: “Despite there being plenty of good landlords out there who want to keep the impact on their tenants to a minimum, the reality of the situation is that now the Bank of England has raised the base rate, many landlords will find that the increase in their mortgage repayments makes their current financial situation unaffordable, and will be forced to consider rent increases as a result.”
Some 40% of landlords surveyed by MakeUrMove earlier this year indicated that the new laws, regulations and tax changes being introduced meant they were already considering increasing rents and 29% said a rise in the base rate was their biggest worry in 2018.
Morris added: “Clearly, this rate rise is now an added pressure which could be the tipping point that means a large number of landlords decide they have to pass on their additional costs to tenants in order for it to remain viable for them to let their properties.
“The government are currently sleepwalking into an ever deepening housing crisis and the Bank of England base rate rises are adding to the burden felt by many landlords.
“This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.”