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The Effects of Increasing Mortgage Rates on Landlords

By August 2, 2023No Comments

Mortgage rates are largely influenced by the Bank of England’s base rate, which, in order to try and curb inflation rates, has had 13 consecutive increases. With yet another increase to the base rate on the cards for this month, many are concerned that mortgage rates are only set to increase further, despite already being at some of their highest levels.

But what are the consequences of rising mortgage rates, specifically for landlords? And where should you go for help if you’re struggling to manage your finances? We discuss all this and more below.

How are high mortgage rates affecting landlords?

Rising mortgage rates are wreaking havoc on the already-shaky rental sector, leaving many landlords really feeling the pinch. In fact, Savills estate agents have suggested that landlords are currently taking in their lowest profits in 16 years. Because of rising interest rates, many lenders are pulling their buy-to-let products and introducing other high-interest alternatives instead. This is particularly concerning for landlords coming to the end of a fixed-rate deal (or those looking to remortgage) who are likely to be hit with a huge financial shock when arranging new mortgage payments.

This issue is not only affecting landlords; it’s having a knock-on consequence for tenants too. Many landlords are having to increase their rent prices to cover these rising costs. Worryingly, a significant percentage of landlords are considering selling up and exiting the rental market altogether, with experts warning that this will increase rent prices even further. If you haven’t already, check out our Will Landlords Selling Up Cause A Housing Crisis? blog where we discuss this further.

In reality, mortgage rates are only one piece of the picture. There are many factors affecting landlords at the moment: the proposed Renters’ Reform Bill, the reduction in the Capital Gains Tax allowance and the latest EPC rules are all contributing to the financial struggle that many landlords are grappling with.

What can you do if you need help managing your finances?

It’s not all doom and gloom – Warr & Co are here to help! Our team of experienced accountants provide straightforward, honest advice to help you ensure your business is as profitable and as tax efficient as possible. Our landlord accountants specialise in this area of tax and we’ll provide you with a comprehensive service with no hidden costs. You can find out more about our landlord accounting service, request a free consultation and download our free landlord accounting guide via our webpage.

Don’t forget: if you are considering selling up, please do bear in mind that you’ll have Capital Gains Tax to pay – which must be done within 60 days of completion! Talk to us if you’d like guidance relating to this; we can handle the matter for you. Drop us a line to discuss your requirements in more detail, or take a look at our Residential Property Sales: 60-Day Deadline For CGT blog for further information.

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