Just over half (52%) of landlords are looking to increase rents if the Bank of England’s (BoE) base rate increases to 4.5%, according to a report by Finbri.

The current base rate is 3.50% with the next Monetary Policy Committee (MPC) meeting scheduled for 2 February, where the rate is expected by many to increase.

The report suggests that the impact of increasing interest rates may increase the existing rental stock shortage faced by the UK property market.

Higher maintenance costs and the possibility of rent arrears are commonly a result of high inflation.

Data found that 53.85% of landlords have had trouble sourcing new investment opportunities.

With fewer mortgage products available, the increasing chain breaks as a result of rising rates, and 71% of estate agents believing home sellers have set unrealistic prices for their property, investment opportunities are limited.

However, it highlights that there may be an opportunity for investors at auction.

In December last year, there were 3,300 residential properties available at auction, up 22.8% year-on-year, with 2,250 lots selling, up 6.5% year-on-year.

This is set to continue this year with a rise of repossessions expected as a result of more homeowners being unable to meet their mortgage payments.

With the possibility of increasing rents, landlords are looking for other methods to remain financially viable.

Over half of the landlords surveyed plan to increase their rents if the bank’s base rate reaches 4.5%.

This will allow property investors to cover additional expenses and mitigate any cost increases from rising mortgage rates.

The report found that 45.35% of landlords will look to alternative investments.

These included Stocks and shares (31.97%), Tangible assets (26.37%), cryptocurrency (25.47%), forex trading (25.27%), private debt (25.17%), hedge funds (24.78%), private equity (23.88%), infrastructure (23.08%), venture capital (22.58%) and commodities (22.18%).

However, for some landlords, the increasing rates may mean a decision to exit the market.

Finbri found that 44.66% of landlords plan to sell up or reduce their portfolio if the base rate reaches 4.5%.

Finbri bridging loan broker Stephen Clark says: “The base rate is directly linked to the cost of borrowing, so it’s not surprising that landlords are looking to increase rents.”

“It’s not just tenants who may be affected by rent increases if interest rates continue to climb. The UK housing market as a whole could experience further undersupply and combined with a recession looming, there is the growing risk of a property market crash.”

“With the base rate expected to reach 4.5% this year, 45.35% of landlords would consider alternative investments, whilst 44.66% would look to sell their investment properties.”

“However, despite the looming impact of increasing rates on landlords, our research shows that 45% are planning to invest in property this year.”