According to figures produced by trade association, UK Finance, 8,980 buy-to-let mortgages had arrears that totalled over 2.5 per cent of the outstanding balance as of June 2023 – a rise of 28 per cent in comparison with the end of March.
Almost half of landlords saw arrears rising to over five per cent. If the trend continues, there are fears fewer homes would be available to rent, pushing up charges for tenants who have already seen prices jump.
Figures have also shown that the average for a buy-to-let mortgage rate in June was 5.45 per cent before rising to 6.18 per cent in July.
Kate Steere, a mortgages expert at finder.com, said: “We’re seeing a trend of landlords pulling out of the buy-to-let market as consecutive base rate hikes have made it unprofitable for them to continue.
This will have a worrying impact on an already competitive rental market, leaving renters with fewer options and rising costs as they attempt to navigate the cost-of-living crisis.”
Although mortgage arrears for landlords have increased, monthly costs for renters have risen by 5.3 per cent on average in the year to July the latest figures have shown.
In London specifically, rents have increased 5.5 per cent in the year leading to last month – the sharpest increase in rents since comparable records began for London in 2006.
Ben Twomey, Chief Executive of Generation Rent told the Standard: “Renters are between a rock and a hard place; stay where they are and face a rent hike or move out and try to find somewhere cheaper which might take them miles away from their family, friends and work.
“The increase in mortgage interest rates shouldn’t be causing pain for so many renters. According to our recent survey, only 12 per cent of landlords are saying the rise in mortgage interest rates is the reason they are putting the rent up.
“Only a minority of landlords have faced an increase in mortgage interest rates, while the majority of tenants have faced a rent rise over the last year.
“Is it right that the government has given mortgage-holders protection from repossessions, but where is the same support for renters?”
On August 3, the Bank of England raised interest rates by 0.25 per cent to 5.25, the 14th successive hike.
Following the hikes, according to Moneyfacts, the average two-year fixed residential mortgage rate is now 6.77 per cent, while the