Bank of England Interest Rate Hike Could Lead to Rent Rises

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The Bank of England interest rate hike could leave landlords passing on the costs to tenants.

Last week’s interest rate growth to 0.75 per cent is likely to leave many landlords with no choice but to pass on costs through higher rents. Despite the recent stamp duty increase on second properties and the capping of mortgage interest tax relief at 20 per cent for all rental income, the majority of landlords have avoided shouldering tenants with the bill.

However, landlords currently on tracker mortgages could see their bills rapidly increase. A tracker mortgage matches any rise in the base rate, and will find that an extra 0.25 per cent will add £12 per month to a £100,000 remortgage payment. It will also add £25 to a £200,000 loan.

The potential for rent rises is no surprise, with 40 per cent of landlords interviewed by MakeUrMove earlier this year claiming that tax changes and growing regulation meant that they were already considering increasing rents. A sizeable 29 per cent said that the base rate was their biggest worry in 2018.

Managing director at MakeUrMove, Alexandra Morris, explained: ‘Despite there being plenty of good landlords out there who want to keep the impact on their tenants to a minimum, the reality of the situation is that now the Bank of England has raised the base rate, many landlords will find that the increase in their mortgage repayments makes their current financial situation unaffordable, and will be forced to consider rent increases as a result.

‘Clearly, this rate rise is now an added pressure which could be the tipping point that means a large number of landlords decide they have to pass on their additional costs to tenants in order for it to remain viable for them to let their properties. The government are currently sleepwalking into an ever deepening housing crisis and the Bank of England base rate rises are adding to the burden felt by many landlords. This is particularly concerning when private landlords provide a vital role as the backbone of the UK housing market.’

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