Landlords would need to raise rents by £614 a month in London and the South East to remortgage at current rates without making a loss.
Rents would have to increase from £1,498 to £2,112 a month – a jump of 41% according to Hamptons estate agents.
A report in the Daily Telegraph today suggests many more landlords will be forced to sell since they will be unable to raise rents to such a level to remain in the black.
The average two-year buy-to-let mortgage rate has reached 6.44%, while five-year deals are at 6.31%, according to Moneyfacts. In contrast, in 2021 the average two-year deal was at 2.96%.
National Residential Landlords Association director of policy and campaigns Chris Norris told the Telegraph: “We’re seeing lots of people talking about exiting the market at the moment because they’re not able to increase the rent – they don’t feel it’s right or sustainable to increase the rent by the amount they would have to.
“If you’re talking about 30 or 40%, that’s not sustainable. The option you’re left with is to dispose of that property and to exit.”
Norris said that landlords were also are having problems remortgaging when they come to the end of their low fixed-rate deals because they can no longer pass stress tests for new mortgage products.
Rents have risen faster than pay for 21 consecutive months and now take up 28% of earnings before tax.
Generation Rent campaign group spokesperson Dan Wilson told the We’re hitting the limits of what is affordable for tenants.”
Earlier this week Mortgage Strategy reported that rental affordability is now at its worst for a decade in seven of the 12 regions of the UK.
At a city level, rental growth is highest in Edinburgh (13.7%), followed by Manchester (13%), Glasgow (12.3%) and Southampton (10.7%).
Zoopla anticipates rental growth to slow towards 8% by the end of the year which will still be above earnings growth.
According to the report, rents will only decrease if there is a significant increase in supply, or a drop in demand and this is unlikely as we enter the busiest time of the year for lettings (between July and September).
Zoopla executive director Richard Donnell understands the growing pressure but says: “A proportion of landlords continue to sell but talk of an exodus is overstated. The real pressure of higher mortgage rates on landlords hits the 20-30% with the highest loan to value mortgages where landlords may need to inject extra capital when they refinance or look to sell”.
