With savings returns remaining low, residential property has continued to attract investors seeking income, supported in recent years by cheap borrowing, strong tenant demand and stable yields. Buy-to-let has remained a core investment despite tax and regulatory changes and a growing private rented sector, now housing around one in six people.

However, signs are emerging that investor appetite is weakening ahead of the Renters’ Rights Act coming into force on 1 May. At the same time, rising mortgage costs are increasing pressure on landlords, raising concerns over the short-term outlook for the sector.

Buy-to-let mortgage rates are rising sharply amid unrest in the Middle East, according to Moneyfactscompare, adding to mounting financial pressure on landlords ahead of new rental rules.

Average two- and five-year fixed rates have both increased since early March 2026. The two-year rate is now at its highest level in a year (5.40%), while the five-year rate has reached a two-year high (5.91%).

For landlords, this means higher costs. Monthly repayments on a typical £250,000 loan over 25 years are now around £1,100 more than at the start of the month.

Product choice has also narrowed, with around 1,300 buy-to-let deals withdrawn since March, pushing total availability to below 5,000 for the first time since November 2025.

Further costs are on the horizon. Landlords are preparing for the Renters’ Rights Act in May and could need to spend up to £10,000 per property to meet minimum EPC C requirements by 2030, putting additional pressure on returns.

Rachel Springall, finance commentator at Moneyfactscompare, said: “Soaring borrowing costs will cause pain to landlords this year, as they join millions of consumers facing higher mortgage repayments. This is terrible news, as rising costs could lead to higher rental payments for tenants, or a drop in the pool of properties available for rent if landlords decide enough is enough and sell off their portfolio. The unrest in the Middle East has caused absolute mayhem in the residential mortgage market, buy-to-let rates are also being hiked, and hundreds of deals have been pulled from sale.

“The positive sentiment entering 2026 has been shattered, and landlords not only have to face higher borrowing costs, but also prepare themselves for the Renters’ Rights Bill, which comes into effect at the start of May 2026. Those who were to take out a mortgage now compared to the start of this month will face higher repayments of £1,100 more a year. This is based on a borrowing of £250,000, over 25 years at 5.29%, versus 4.66% at the start of March 2026.

“It is entirely possible that landlords may have to take on an additional loan to cover refurbishment costs, to ensure they abide by the Decent Homes Standard, which is set out in the Renters’ Rights Bill, again coming into force this May. It is of course essential that tenants feel safe and secure in their homes, and it will be ever more essential to have a dwelling as energy-efficient as possible with rising costs expected this summer.

“Thankfully, lots of progress would have been made to make private lets more energy-efficient over the past six years, under the Minimum Energy Efficiency Standard (MEES) regulations, whereby landlords have been prohibited from letting properties with an EPC rating below E. However, landlords’ costs will escalate further, as they are expected to invest up to £10,000 as a spending cap to reach an EPC rating of C by October 2030, subject to the value of a property.

“If that EPC rating is not achieved, landlords could face substantial fines, as the rules apply to all tenancies. Seeking advice will be essential for new or existing landlords to keep on top of the changing legislation and how rising costs and interest rate rises will hit their profit margins.”