NRLA calls for mortgage relief as interest rates soar

The National Residential Landlords Association (NRLA) is demanding immediate action from the government to alleviate the financial strain on renters and landlords after 13 consecutive interest rate hikes.

The organisation says the full restoration of mortgage interest relief and the unlocking of housing benefit rates will ease the burden.

Its urgent appeal comes as the Bank of England raised interest rates by 0.5% to 5% to combat the UK’s high inflation.

Although it is slightly down from previous months, the current inflation rate of 8.7% remains significantly above the Bank’s 2% target.

The NRLA says the latest increase will add financial pressure on landlords with buy-to-let mortgages.

‘Hard hit by rising mortgage costs’

Ben Beadle, the NRLA’s chief executive, said: “85% of buy-to-let mortgages are interest only, making them especially hard hit by rising mortgage costs.

“Some landlords have seen mortgage payments rise by almost 240% since December 2021.”

He added: “Analysis for the NRLA has found that 735,000 rental properties could be lost across the UK if interest rates peaked at 5%, further exacerbating the supply crisis renters are facing.

“It makes no sense to have a tax system that discourages investment in the homes renters need, and benefit payments that fail to provide vulnerable tenants with the assurance that they can afford their rents.

“The Chancellor needs to take urgent action to support the rental market by reintroducing mortgage interest relief in full and unfreezing housing benefit rates.”

Thousands of landlords may be forced to quit the PRS

Property Master also says its research highlights that thousands of landlords may be forced to quit the PRS because of rising mortgage rates.

The online mortgage broker says that 40% of landlords have either recently sold, or are considering selling, one or more properties.

It says that if this came to fruition, the impact would be ‘very significant on tenants’ and the overall housing market.

The firm also says that the government should not ignore landlords who provide homes for five million households as financial pressure grows.

Borrow on interest-only mortgages

The chief executive of BTL mortgage broker Property Master, Angus Stewart, said that landlords tend to borrow on interest-only mortgages.

And with their fixed rate deals expiring, they are facing a ‘very substantial increase in costs’.

He says that with most fixed rates now over 6%, the interest costs can have tripled since their last mortgage was taken.

Mr Stewart said: “The continued increase in interest rates is causing a perfect storm.

“George Osborne’s changes to the rules on interest rate relief in 2015 had minimal impact when interest rates were low.

“However, they are now seriously impacting the profitability of a landlord’s business.”

What might happen to BTL landlords

The NRLA’s view of what might happen to BTL landlords has been echoed by Chestertons who say that landlords struggling to make a profit will quit the sector.

The firm’s head of sales, Matt Thompson, said: “We expect the rate rise to have an impact on overleveraged buy to let investors whose increased mortgage payments could lead to their investment making limited profit or even a loss.

“This could result in some landlords deciding to offload their assets.

“Demand for properties in London continues to stay strong as the capital remains a hotspot for a variety of buyer demographics, including international buyers.”

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