Millions of renters in the UK are facing the brunt of higher mortgage costs passed on by landlords, leading to a surge in rent prices and exacerbating the cost of living crisis. Experts and charities have issued warnings, stating that the Bank of England’s rapid increase in borrowing costs is not only affecting homeowners but also posing a threat to affordable housing.
Matt Downie, CEO of Crisis, a homelessness charity, highlighted the dire situation faced by low-income renters who are unable to cover their rent amidst rising mortgage costs and soaring energy and food bills. He emphasized the inadequate support provided by housing benefits and the severe shortage of affordable housing options.
Official figures reveal that private rental costs in the UK rose by 5% annually in April, the sharpest increase since January 2016, while rents outside of London experienced their fastest growth since 2006. Landlords are raising rents in response to their own escalating expenses, and those unable to do so are resorting to selling their properties, putting tenants in a precarious position. Citizens Advice has reported a quadruple increase in the number of people seeking help with no-fault evictions, reaching record levels.
While there has been significant concern over the impact of rising mortgage costs for homeowners, it’s worth noting that the number of households living in rented homes surpasses those with mortgages. About 9.2 million households rent privately, whereas 7.4 million have mortgages. Less than a third of households in England and Wales own with a mortgage, with a considerable proportion renting privately or living in social rented accommodation.
More than half of landlords in England have buy-to-let mortgages, with approximately 2 million outstanding loans. The Institute for Fiscal Studies has warned that the increase in interest rates impacting landlords’ borrowing costs is one of the key factors driving up rents. Renters typically pay 24% more than those with mortgages, even before the pandemic.
Darren Baxter-Clow, a policy adviser at the Joseph Rowntree Foundation poverty charity, emphasized the need for politicians to address the affordability crisis in private renting, as the focus on higher mortgage costs fails to capture the real pressures faced by renters. However, Torsten Bell, the CEO of the Resolution Foundation, countered this argument, stating that rents are primarily determined by wages and supply and demand, rather than landlords’ mortgage bills.
The Bank of England estimated in December that landlords would need to increase rental incomes by approximately 20% to offset the expected rise in buy-to-let mortgage costs. This would impose a heavier financial burden on renters, potentially leading to defaults on unsecured credit and a sharp decline in consumption, amplifying the economic downturn.
The Royal Institution of Chartered Surveyors has reported a significant increase in the number of buy-to-let landlords seeking to sell their properties, as they struggle to pass on higher costs to tenants. Estate agents also attribute this trend to government legislation, such as Michael Gove’s renters’ reform bill and new energy efficiency regulations. Meanwhile, the shortage of private rented homes and limited availability of social housing are expected to further drive up rent prices.
Polly Neate, CEO of Shelter, a housing charity, emphasized that a considerable portion of landlords do not have mortgages and are profiting greatly from escalating rents. She argued that the lack of investment in genuinely affordable social homes and the increased demand for private rentals are key factors contributing to the high cost of rent, disproportionately affecting tenants in the midst of the cost of living crisis.
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