22^nd Nov 2017

It is now common knowledge that the Bank of England has for the first time in ten years raised interest rates. It is being predicted that rents will have to be increased across the private rented sector to compensate those landlords affected by the bank's action.

Prior to the new interest rate of 0.5%, mortgage payers were enjoying the lowest ever rate of 0.25%. The higher level of payments will have to be paid by those landlords on tracker or variable rate mortgages and some will have to offload the rising costs by levying higher rents on tenants.

Landlords have endured a turgid time over the last couple of years through the government's all out attack on buy-to-let investors by raising the stamp duty, reducing wear and tear allowances, the phasing out of the mortgage interest tax relief as well as the Prudential Regulation Authority's imposing of stricter criteria on BTL lending.

CEO and founder of a peer-to-peer lending platform for residential buy-to-let mortgages, John Goodall, highlighted the new pressure that landlords will have to 'shoulder' because of the interest rate rise: "Landlords have had to face a catalogue of challenges over the past couple of years, from stricter regulation, reductions to tax relief, and a significant stamp duty tax hike when buying a buy to let property. Yet despite these pressures, there has been little sign of them passing on these costs to tenants in the form of higher rents. Record low mortgage rates have enabled them to absorb some of the costs, especially those that are wary of tenants facing negative net wage growth, so a base rate rise could make all the difference."

A spokesperson for a trade organisation claims that in comparison to London's ever changing marketplace the rate rise is ‘relatively small’, so it may have little effect on the city's renters: "Rents go up in the capital because of the housing pressure, so you won’t be able to trace a rent increase specifically."

However Donna McCreadie, a buy to let specialist of a chartered accountants, disagrees with the viewpoint that the interest rate increase will not affect tenants, and said: "The increase of interest rates today announced by the Bank of England is another blow to buy-to-let landlords, who in recent times have already suffered an increase on tax rates and stamp duty. It is a possibility that if a landlord’s current mortgage rate is on a variable deal, this will eventually trickle down to the tenants and affect rent levels."

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