Almost two thirds of private landlords expect to see their mortgage payments increase over the next 12 months with warnings that this trend will lead to higher rents. 

Research for the National Residential Landlords Association has found that, whilst over a quarter of landlords said they plan to re-mortgage over the next 12 months, 60 per cent expect their mortgage repayments to go up. 

The news follows confirmation from the Bank of England that the base interest rate will stay at the 15 year-high of 5.25 per.cent.

According to data from Hamptons landlord investors across the UK are now paying £15 billion in mortgage interest on an annual basis, up 40 per cent over the course of the last year.

The buy-to-let market is especially exposed to the impact of higher interest rates, given 82% of mortgages in the sector are interest-only according to the Bank of England. This is compared to just 11 per cent for owner-occupier mortgages.  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. Rising rents largely reflect the need for landlords to cover the increased costs which they continue to face.

The NRLA calls 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.

Association chief executive Ben Beadle says: “Higher interest rates put continued pressure on renters, as landlords are simply unable to afford growing mortgage costs.

“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.”

Research by Capital Economics for the NRLA found that removing the three percentage point stamp duty levy on the purchase of additional homes would see almost 900,000 new private rented homes made available across the UK over the next 10 years. As a result of increases in income and corporation tax receipts, the modelling suggests this would lead to a £10 billion boost to Treasury revenue over the same period.