Almost two thirds of private landlords anticipate that their mortgage payments increase over the next year with warnings that this trend will lead to an increase in rental payments. It has been noticed that over a quarter of rental property owners plan to re-mortgage over the next 12 months and over half of these expect their repayments to rise, this conclusion follows the Bank of England confirming the base rate will remain at the 15 year high of 5.25%.
The buy-to-let market is extremely exposed to the impact of higher interest rates, given almost all mortgages are interest only, unlike owner-occupier mortgages. As a result of this banks warn that in the near future high rents are a huge probabilty, given rising mortgage repayments and high demand.
Landlords have also spoken about general costs increasing recently and it seems a large proportion are raising rents to cover expenses including maintenance, certification costs and void period costs. As rising rental prices fail to match wage increases for many, renters in the UK can now be expected to pay nearly a third of their wages in rent - a 2.1% increase since last year, this results in an unstainable future for both landlords and tenants alike.
Despite the current situation, mortgage payments are expected to drop further into 2024 as lenders seek to take advantage of cheaper funding, after average swap rates have fallen for five months consecutively. Swap rate activity highlights that the market feels it is more likely that BOE will cut the base rate rather than choose to increase further, which should result in lower mortgages rates through 2024. There has also been news from the government recently how the cost-of-living situation is starting to look more positive and inflation is slowing as we proceed further into 2024.