Four out of ten landlords admit that rents from tenants are barely covering their mortgage repayments and any increase in interest rates could lead to disaster, according to flat and house share website Spareroom.co.uk.

41% of landlords revealed that their mortgage repayments are barely covered by rent payments and 43% admitted that if interest rates increase by 2% their rents will no longer cover their mortgage.

Furthermore, 22% of landlords said that an interest rate increase of just 1% would create a shortfall between mortgage and rent payments and for 10% of landlords an interest rate increase of 0.5% would have this effect.

The Bank of England has held interest rates at 0.5% for some time however it is likely increases will be seen in time.

This concern over mortgage repayments and potential interest rate rises has led 63% of landlords to increase their monthly rents since the beginning of the year. 21% admitted that they have or are planning to increase rents by 5% and a further 18% plan to increase rents by 3%-5%.

More than 50% of landlords are worried that this increase in rents will lose them loyal tenants.

Matt Hutchinson, director at Spareroom.co.uk said, “Britain’s landlords are in a catch 22. On the one hand, the rise in Capital Gains Tax for higher rate taxpayers means that many landlords either won’t be able to sell their buy-to-let properties full stop or will sell at a far greater loss. At the same time, holding onto their properties means they are at the mercy of the Bank of England and facing higher mortgage payments.

“For many landlords, it is hard to know which way to turn, and it could be that tenants feel the full force of landlords’ financial strain. The vast majority of landlords who have good relationships with their tenants don’t want to force the rent up, but for those who are struggling to make ends meet, it’s the only option.”

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