Tenants across the UK could be in for a sharp increase in rental costs this year, according to analysis by Barrows and Forrester.
The findings indicate that landlords, facing rising buy-to-let mortgage costs, may have little choice but to raise rents to cover the increased expenses.
Barrows and Forrester analysed the average monthly cost of a buy-to-let mortgage in December 2021, when interest rates began to climb. It based its calculations on a two-year fixed product at a rate of 2.9% on the average house price of £268,115 at that time.
The research highlights that in December 2021, landlords would have paid an average of £942 per month as a full repayment or £486 per month as an interest-only payment for a buy-to-let investment. However, as of today, 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.
This translates to a significant increase in the average monthly cost of a full repayment, amounting to a 20.1% rise, or £190 more per month. For interest-only payments, the increase is even more substantial, at 44.6%, or £217 more per month.
Despite the higher costs faced by landlords, Barrows and Forrester’s analysis indicates that tenants have yet to experience a corresponding increase in rental prices. Since December 2021, the average monthly cost of renting across the UK has only risen by £124 per month, reaching £1,184.
Even in London, where rents have gone up by £227 per month since interest rates began to rise, the average cost of repaying a buy-to-let mortgage has increased by a higher margin, reaching £297 per month for a full repayment or £372 per month for an interest-only repayment.
However, tenants who secured more favourable mortgage rates before the first interest rate hike in December 2021 may now be approaching the end of their fixed term. This could potentially result in higher rents, as landlords face limited options to offset the increased borrowing costs. As a result, tenants across the nation could face the prospect of paying higher rents in the coming months.
James Forrester, managing director of Barrows and Forrester, commented: “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.”
And Maintenance costs are rising dramatically, sad if you cap the rents so many more will leave.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Breaking news – rents are going to rise.
What pointless analysis when it’s obvious that rents are rising and will continue to rise.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Indeed a genius LOL
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Not as obvious as you would think. There is a limit to how much they can rise before the tenants can’t pay and they are being stuffed with rising cost of their own.
What is missing in the story is that many a landlord may not be able to increase rents and we are seeing for many, the yield is starting to get close to non-existent, so why bother for any scraps that they may get, only to be lost if rates increase further?
Not all landlords live in the home counties region with apparent oodles of money. Those tenants that have money to pay the high rents are doing so out of necessity, otherwise it is becoming far cheaper to buy and that is very true for many parts around the UK.
A higher rate landlord paying 40% tax on gross income (criminal) a 25% to 30% increase in maintenance costs, net reduction to cover mortgage interest rises, add in all the licence fees (where applicable) and indemnity fee, plus agents charges ……….. not much left over or not worth getting out of bed for and sells up.
Any wonder why very little new BTL landlords are entering the market when stamp duty is costing 3% to 9% dependent on which part of the country and value. Add in the threatened £10,000 plus, EPC improvements required for a Band C …….. yipes who would want to jump into bed with that lot.
The meltdown has already started in many parts of the country (supply and demand is proving this) and its going to get worse AND who’s the loser, the real loser? Homeless people joining the already over crowded temporary sheltered housing. If you don’t rent, you have no comprehension of the misery!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register