Buy-to-let mortgage rates have surged to their highest levels in over a year as turmoil in the Middle East drives sharp increases in borrowing costs for UK landlords.
The typical two-year fixed rate for landlords climbed from 4.66 per cent at the beginning of March to 5.29 per cent by March 26, according to Moneyfactscompare.co.uk, marking the steepest level since February 2025.
Five-year fixed deals have also risen significantly, increasing from 5.05 per cent to 5.63 per cent over the same period, reaching a peak not seen since January 2024.
For landlords with a £250,000 mortgage over 25 years, these increases translate to approximately £1,100 in additional annual costs.
Rising energy prices linked to the conflict have pushed up swap rates, which lenders use as a key mechanism to price mortgage products.
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “The unrest in the Middle East has caused absolute mayhem in the residential mortgage market, buy-to-let rates are also being hiked and hundreds of deals have been pulled from sale.
“The positive sentiment entering 2026 has been shattered.”
Property analysts have indicated that tenants could ultimately face higher rents as landlords respond to increased borrowing costs.
David Fell, lead analyst at Hamptons, said: “The last time mortgage rates spiked in late 2022, landlords’ higher costs were quickly passed on to tenants through rapidly rising rents.”
Landlords face rising borrowing costs amid the ongoing Middle Eastern conflict
|
GETTY
He said prospective tenants were previously forced into bidding wars above asking prices to secure homes, while existing renters experienced increases despite years of stable costs.
Mr Fell added: “If interest rates remain materially elevated, there is a risk that we will see a second round of elevated rental growth.”
Landlords are also facing a reduced number of available mortgage products as lenders withdraw deals from the market.
Around 1,300 buy-to-let mortgage deals have been removed since the start of March, leaving borrowers with fewer options.
The rise in costs comes ahead of significant regulatory changes set to take effect.
Keir Starmer’s Renters’ Rights Bill is set to come into force from May
|
GETTY
Labour’s Renters’ Rights Bill will come into force on May 1, introducing reforms including the abolition of Section 21 “no-fault” evictions and the removal of fixed-term tenancies.
The legislation will also introduce restrictions on rent increases, limiting landlords’ ability to adjust payments in response to rising costs.
Ms Springall said: “Seeking professional advice will be essential for both new and existing landlords navigating the shifting legislative landscape alongside escalating borrowing costs.”
Industry bodies have raised concerns about the combined impact of higher mortgage rates and regulatory pressures on the rental sector.
Megan Eighteen, President of ARLA Propertymark, said: “Rising buy-to-let mortgage rates will place significant additional pressure on many landlords at a time when they are already grappling with substantial regulatory and cost burdens.”
She said there was “real concern” that some landlords may leave the sector due to mounting expenses, which could worsen existing housing supply shortages.
Additional financial pressures are also emerging for landlords beyond mortgage costs and regulatory reform.
New Making Tax Digital requirements taking effect in April will require those earning above £50,000 annually to submit quarterly tax filings.
Industry experts have also warned that meeting Energy Performance Certificate standards by October 2030 could cost landlords up to £10,000 per property.
