There are calls for urgent government action to support landlords in the private sector, after the latest Bank of England predictions suggest buy-to-let mortgage repayments will increase by an average of £275 a month by the end of 2025.

The National Residential Landlords Association says that without action these increases are likely to exacerbate supply issues, and could lead to further significant rent increases.

The Bank of England’s latest Financial Stability Report points out that landlords face increased mortgage costs due to higher interest rates. But it also notes that structural changes in the market are putting further pressure on profitability across the sector. These include “adjustments to income and capital gains tax rules and proposed changes to building energy efficiency regulations and tenancy protection.”

It points out that if landlords where to absorb higher mortgage costs without increasing rents, the share of buy-to-let mortgages with an interest coverage ratio below 125% would increase significantly — from around 3% of the market at the end of 2022 to just over 40% by the end of 2025. 

NRLA chief executive Ben Beadle says: “Growing mortgage costs are putting responsible landlords in an impossible position. Either they leave the market at a time when demand for rented housing is already outstripping supply, increase rents, or soak up growing costs which many simply cannot afford.”

He says while the government’s ‘mortgage charter’ aims to provide some help for residential homeowners nothing is being done to support the private rented sector. 

Beadle says that unfreezing housing benefit rates could offer immediate help for tenants, so they could cover increased rent payments. 

He adds: “Alongside this tax hikes on the sector need to be scrapped to boost the supply of homes to rent that tenants desperately need.”