Buy-to-let landlords are facing a fresh financial squeeze after the Bank of England increased interest rates to 4%. Tax and advisory firm Blick Rothenberg warns that these higher mortgage costs, combined with other changes, could prompt more landlords to reconsider their investments.
The interest rate rise follows a government decision to increase income tax rates on rental profits by four percentage points, effective from April 2027. Heather Powell, a partner at Blick Rothenberg, stated that landlords must now factor in higher mortgage costs and the additional income tax when assessing their finances.
Landlords also face tighter restrictions on raising rents due to the Renters' Rights Act. This legislation limits rent increases in covered private tenancies to once a year, and tenants can challenge increases they deem excessive. Powell noted that landlords cannot automatically pass on additional costs to tenants under these new rules.
Blick Rothenberg believes that these rising costs could accelerate landlords' departure from the private rented sector. Powell warned that a reduction in rental properties could eventually lead to higher rents due to a shortage of supply.