NRLA research manager Nick Clay on the impact of rising mortgage rates on landlords and tenants.

In recent weeks much has been made of the impact rising interest rates are having on the PRS.

The NRLA’s Quarter 2 survey has shed some further light on how the impact increased rates on buy-to-let (BTL) mortgages is affecting the sector. Moreover, the research has highlighted the specific impact of fixed rate deals which are due to come to an end in the next six months.

Around a third of NRLA members with BTL mortgages have at least one mortgage coming to an end before the end of March 2024.  

It is this group of landlords who face the prospect of higher mortgage payments – exacerbated by interest cover ratio requirements. As a result, this group of landlords are: 

1. More likely to have reduced their portfolio and the most likely to be selling property in the next twelve months 

1. The most likely to have both raised rents recently, and the most likely to raise rents in the immediate future.  

2. The most likely to have issued a Section 21 notice, preparing the property for eventual sale.  

With so many BTLs on fixed term deals linked to minimum interest cover requirements, it is easy to see that in any local area, the end of fixed term deals is forcing landlords to put rent up, which in turn creates an inflationary rental spiral as other landlords receive market-rent signals.

However one of our latest research blog post also shows a number of landlords are digging to their own savings to shield valued tenants from necessary rent increases.   

To help bring inflation down, we believe there is a case for a brake or ceiling on interest cover requirements, which would help ease the strain on both landlords and tenants.