percentages stacked. Rising interest rates

Interest rates have been soaring since last year. While the everyday homeowner is gasping at the rise in rates, landlords are frankly suffocating. 


Understandably, landlords who are on a fixed-rate mortgage with a good few years left to enjoy it are sitting back humbly and thanking their lucky stars. However, for those who are looking to expand their portfolio or remortgage, rates are simply blowing property businesses and small portfolio holders out of the water. 


Now whilst the single homeowner who is struggling with interest rates won’t have much empathy for a landlord who is seeking their next investment, it’s always worth remembering the fragility of the market for landlords. 


Rising interest rates. Man with hands on head.


Much like dominos, if one investment crumbles the others are weakened by this inevitability as well. 


The stark reality for most landlords with holdings of £222,000 or less was to raise the rent or sell up as of last September. A decrease in profit hit a record 72% says The Express online. And with only one in twelve tenants actually able to pay their reduced rent, landlords are footing the bill and feeling the pinch, punch and sitting in financial crisis themselves. 


How much have mortgage rates risen?

Back in November 2022, the average mortgage rate for a two-year fixed rate 90% LTV mortgage rose to 6.25% from a low of 1.95% in January 2022. This is the highest level they have been since September 2010 when they were 6.27%.


Fixed mortgage rate (£200,000 over 25 years) Monthly payments Increase in monthly payments
1% £754
2% £848 +£94
3% £948 +£194
4% £1,056 +£302
5% £1,169 +£415
6% £1,289 +£535


Statistics from Rightmove

Rising interest rates. Houses

Can I still get a fixed-rate mortgage deal now?


Miraculously, there are deals to be had. A fierce mortgage broker with a gleam in their eye will certainly be able to find you something. 


That is, of course, if you have all your ducks in line. More than ever, the mortgage market is competitive, the rental market is competitive and the property industry is hostile. But will it stay this way? Read on to see our predictions. 


How will rising interest rates affect the rental market?


Here are a few ways you may have been impacted by the raise in interest rates:

Slow completion 

You may have felt the impact first-hand. Commonly, we are hearing stories of rental buyers experiencing extreme delays with compilation and banks withdrawing offers late in the game. 


Tenants unable to pay reduced rent 

More impactfully for those who are MHO (multiple homeowners), the rise in rent which has been a result of inflation, has left tenants unable to even pay reduced rent. 


Vacant properties with no tenants 

More and more, we see dormant and vacant rental properties littering the country. This will certainly have an impact on your cash flow.


Have you got your landlord insurance in place? Speak to one of our advisors today and we’ll start to draft up your insurance plan with you at the forefront of it. 


Should you increase your rent in line with inflation?


Yes, you absolutely should. But even better, before purchasing your rental property, think about diversifying your tenant demographic. Locations and occupations that expand over varying places and people will hold you in good stead. 


Similarly, a strong and thorough screening process will allow you to understand the tenants you are getting into an agreement with. Sniff out those financial arrears and be weary of those that offer 6 months’ rent upfront. If it’s too good to be true… Well, you know the rest. 


Will interest rates come down?


Keep reading and researching. At CIA, we’re keeping our fingers crossed based on the whisperings we hear. In fact, get your eyes on the rental property market in a few months and see if the rates are starting to fall. 

Choose high-yielding properties over a range of locations and be aggressive with your mortgage hunting. And in the meantime, get your landlord insurance organised. 

Get in touch with CIA today. We’re ready to take your call.

We won't be beaten on any like for like landlord insurance quote.

Get a quote