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Rents not rising in line with soaring landlord costs - survey

A lettings agency says its research shows that higher interest rates have not been passed on to tenants through higher rent.

Barrows and Forrester analysed the average monthly cost of a buy to let mortgage in December 2021 as interest rates started to climb, based on a two year fixed product at a rate of 2.9 per cent on the average house price of £268,115 at the time. 

The research shows that in December 2021, landlords would be paying £942 per month as a full repayment, or £486 per month as an interest only payment. 

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Fast forward to today and the same mortgage on the current average house price of £289,818 would require a full monthly repayment of £1,133, or a monthly interest only payment of £703. 

That’s a 20.1 per cent increase in the average monthly cost of a full monthly repayment, equating to £190 more per month, or a 44.6 per cent increase in the average monthly interest only repayment adding £217 more to the monthly cost. 

However, further analysis by Barrows and Forrester shows that, so far, tenants have yet to be hit with a rental increase in line with the higher cost of BTL borrowing. 

Since December 2021, the average monthly cost of renting across the UK market has increased by just £124 per month to £1,184. 

Even in London, where rents have risen £227 per month since interest rates began to increase, the average cost of a repaying a BTL mortgage has increased by a greater margin; by £297 per month for a full mortgage repayment, or £372 per month for an interest only repayment. 

However, those who would have secured a more favourable rate prior to the first interest hike in December 2021 will be approaching the end of their fixed term this year, meaning tenants could be facing higher rents.

Agency managing director James Forrester says: “As it stands, the nation’s landlords are yet to hand down the far higher cost of borrowing to their tenants and while rents have climbed of late, they haven’t increased at the same rate as the monthly cost of a mortgage. 

“This is partly due to the fact that many landlords will have secured a favourable rate on a fixed product before interest rates started to climb. 

“But those that managed to do so are likely to be approaching the end of their fixed term this year and will be hit with far higher rates when they do. 

“Many landlords opt to pay an interest only payment to service their loan while benefiting from the rental income and the capital appreciation of their portfolio. So whether they are entering the market now, or looking to lock in a new rate for a fixed period, their monthly cost is going to have increased considerably. 

“Unfortunately for the nation’s tenants, they are left with little choice but to recoup this higher cost via an increase in rents and so we expect to see sharp upward growth in the average cost of renting as the year progresses.”

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

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    There's bound to be a time lag because rents can only be increased once every 12 months. Also student tenancies are often signed up 10 months before they commence.

    I can't hit any tenant with the full extra mortgage cost as it occurs on a per property basis but I can spread most of it across my portfolio over a period of time.

    I have one tracker mortgage where the payments have increased by nearly 450% in the last 15 months. 5 fixes ending this year and then another 5 are fixed until 2025 or 2027. Several are unencumbered so that helps.

    The biggest problem is that because of Section 24 the government take at least 40% of any rent increase even though the mortgage lender has to be given that money, so the rent increase has to be bigger than would otherwise be the case. It still won't fully cover the increased costs for at least a year or so but it will come right over a period of time.

    The thing to remember is that homeowners are also facing massive mortgage hikes so tenants certainly aren't alone in this. In a lot of respects they are in a better position because market forces dictate rent increases are far more modest than mortgage rate increases and rent includes all other property related costs such as insurance and maintenance.

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    As Jo says above there is a time lag, however as costs increase these increased costs will always be passed onto the end user as they would in any business, it just takes time to filter through

     
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    Its a shame that a few residential landlords are giving up on the businesses that could give them income for life. I have a rental unit in Stevenage that had an EPC of Grade E. My tenant had moved out to FTB a brand new flat. I took the opportunity to get my plasterer to install Recticel Instafit slimline insulation panels on all of the internal walls (those on the external elevations) because I couldn't get the other long leaseholders to jointly pay of cavity wall insulation, I took out the old gas combi boiler, that had been giving me problems, and got my electrician to install just two Dimplex Quantum night-storage heaters and an Economy 7 hot water tank. I've had the flat's EPC re-assessed and its now an EPC Grade C. With the proposed MEES legislation soon hitting us this unit is now fit-for-purpose for many years to come. I started the process by getting a draft predicted EPC from my long-time energy assessor who guaranteed the final EPC Grade C outcome. I'm close to signing a long-term lease with a supported living provider who will putting a disabled tenant into this flat.
    I can't understand why landlords are giving up when the solutions are pretty straight-forward.

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    You are still a Dick

     
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    Your a "Recticel Instafit slimline insulation" sales guy aren't you?

     
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    This is getting boring now. Very lazy pasting the same comment on every article whether relevant or not.

     
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    Also, I see he does not respond to any comments on his posts.

     
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    Martin. It is not really smart to copy and paste this comment on every article. 3 so far today. Are you on a crusade?

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    The fact is it has become clear that the government agenda is no longer just to appease the three big anti landlord gangs in return for votes ,it is to make it impossible for the non corporate landlords to exist even the gangs are now being honest with their intentions they no longer even pretend to be pro tenant they admit to be anti small family landlord and are pro the multi million corporates

    It does not take much research to suggest that the handsomely paid executives at shelter ,acorn, generation rent could be recipients of rewards from extremely grateful large multi million corporate landlords who will be in a position to charge what they like and force tenants to except any conditions as there will no longer be any competition ,the three powerful gangs and their political backers have seen to that
    So who do we think will receive large allocations of preference shares in the corporate landlords
    and who do we think will be receiving six figure consultancy fees via offshore companies {so it can't be traced back } from the same corporate landlords ,
    I wonder

  • Sarah Fox-Moore

    The smaller landlord in the PRS is a dying breed. Landlords with 1-4 properties who currently make up a large % of the sector are purposefully being driven out, especially those with mortgages/debts on the properties: if section 24 didnt get you, the Renters Wrecking Bill will. Finally the EPC debt bomb set to go off in 2028 will drive any remaining landlords out of the field. In 2021 I had plans to buy more, not now. Now I am selling up instead.

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