Four in ten landlords with a mortgage are due to renew their loans over the next year and believe their monthly payments will be £615 higher, data from The Mortgage Lender shows.

“While mortgage rates have dropped from their peak, those needing to remortgage in the next year will very likely still have to pay more on their mortgage than they currently are or would have had to if they had taken out the same mortgage a few years ago,” the firm’s poll says.

Average two- and five-year buy-to-let residential mortgage rates are 5.52% for both terms, according to Moneyfacts figures today (12 March).

The Bank of England base rate is currently 5.25% as the central bank battles inflation at 4%.

The City currently prices in three 0.25% base rate cuts from June this year. 

“Until then, borrowers will have a decision to make about their mortgage deals,” says The Mortgage Lender’s report.

To pay for these rises, 30% of landlords plan to increase rents, 23% have already budgeted for an increase, while 14% said they would sell the property. 

Another 14% said they plan to convert their property into a house in multiple occupation in order to secure better returns, while 13% are considering converting to a holiday let, according to the study.

The firm says 40% of BTL owners with a mortgage – whether fixed-rate, tracker, or discount – are due to renew their loans in the next 12 months.

While a further 41% are due to renew their mortgages over the next two to three years.

The study points out that 42% of landlords with a mortgage are currently on five-year fixes, 21% are on two-year deals, 15% are on standard variable rates, and 8% are on a tracker mortgage.

The Mortgage Lender head of sales – Midlands, South and specialist distribution Chris Kirby says: “The Bank of England has been grappling with high inflation for well over a year now, introducing successive rate rises to drive it down to more manageable levels. 

“Although they have had some success in achieving this, there is still a way to go. A rate cut could happen this year, though possibly not until the summer. 

“With many due to remortgage this year, it’s important landlords speak to a broker to find the most suitable mortgage for them in order to maintain their property portfolios, particularly as costs of living challenges continue.”