Landlords increase rents as they face 40 per cent increase in mortgage interest payments

Aneisha Beveridge, Head of Research at Hamptons, said: “With mortgage interest often landlords' largest cost, the pace at which rates have risen has squeezed investors. Even if there are no further rate hikes by the Bank of England, we could see the amount of mortgage interest paid by landlords exceed £20bn over the next two years."

She added: “This has the potential to eat up just over half the amount mortgaged landlords receive in rent. For some investors, this will be unaffordable, and they will likely bow out, keeping upward pressure on rents.

“A decade of cheap money and rising house prices encouraged many landlords to remortgage and extract cash out of their buy-to-let when remortgaging.

"Our analysis suggests that most of this money wasn’t reinvested back into buying rental homes and was invested elsewhere or used to help their children buy their first home. Rising rates will reverse this flow of finance, pulling cash out of the economy and back into the housing market as investors look to pay down their debt instead.”

Overall, mortgage interest accounted for around 26 per cent of all rental income in the UK, up from a low of 17 per cent in January 2022. The average mortgaged landlord paid 37 per cent of their rent on mortgage interest in August, up from a low of 24 per cent in November 2021.

The situation has contributed to rising rental prices.

Annual rental growth across Great Britain remained in double-digits during September, with the average cost of a new let up 11.7 per cent on the same period 12 months ago. This is the second fastest increase on record, surpassed only by August’s figure of 12 per cent.

The average rent in Great Britain now stands at £1,325pcm, up from £1,186 in September 2022.

London has seen the highest rent price increases at 15.7 per cent – with an extra £322 per month being demanded and average rents now at £2,376.

In the North the rise has been 8.7 per cent – adding £71 to monthly rents and taking them to an average £889.