“Pain for landlords” as rule changes and market volatility could add thousands of pounds to outgoings

Rising interest rates alone could add more than £1,000 a year to mortgage repayments.

Landlords must brace themselves to face higher costs as ongoing volatility and rules changes in the private rented sector could add thousands of pounds to their outgoings, latest analysis by Moneyfactscompare.co.uk revealed.

As witnessed in the residential mortgage market, the uncertainty caused by conflict in the Middle East has led lenders to pull more than 1,300 buy-to-let (BTL) deals from sale since the start of March. Furthermore, it has also seen interest rates rise sharply; the average rate charged by a two-year fixed BTL mortgage jumped from 4.66% at the beginning of the month to 5.40% today, while the average five-year fixed BTL mortgage rate went from 5.05% to 5.72% over the same timeframe.

“Soaring borrowing costs will cause pain to landlords, as they join millions of consumers facing higher mortgage repayments,” said Rachel Springall, Finance Expert at Moneyfactscompare.co.uk. She explained that landlords currently looking to take out a typical two-year fixed mortgage can expect to pay around £1,100 more a year compared to the start of the month (based on a £250,000 loan repaid over 25 years).

“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,” Springall continued.

Landlords may have to find an additional £10,000

In a further blow, some landlords will be expected to spend up to an extra £10,000 on each of their properties to achieve an Energy Performance Certificate (EPC) rating of at least C by October 2030 under planned changes to the Minimum Energy Efficiency Standard (MEES). “It is entirely possible that landlords may have to take on an additional loan to cover refurbishment costs,” Springall explained.

“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,” she added.

Landlords who fail to meet the requirements could be stung with a “substantial fine”, Springall warned. “Seeking advice will be essential for new or existing landlords to keep on top of the changing legislation and how rising costs and interest rates will hit their profit margins,” she concluded.

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