Landlords are being warned to brace themselves for a mortgage crisis with a hike in mortgage rates that will force many to sell up – or create financial misery for their tenants with rent rises.

The rises could squeeze hundreds of thousands of landlords who invested in buy-to-let property for an income in older age.  Last week, more than 1,000 mortgage deals were pulled from the market, according to rates scrutineer Moneyfacts. Of the 850 or so buy-to-let deals still available, landlords must now pay an average mortgage rate of 5.26% for a five-year fixed rate deal. A month ago, such a deal averaged 3.25%. On a £300,000 mortgage, this might amount to an extra £500 in monthly payments. Mortgage rates have been ramped up after the Bank of England hiked the base rate to keep a lid on inflation. Last December, the base rate was just 0.1%, but Financial markets are predicting it could rise to 6% by Spring. The National Residential Landlords Association believes this is not the time to panic. While mood music is sombre, no one is sure what is going to happen, though commentators are united in their view that landlords should take this opportunity to consider their future plans. The consensus among experts is that those with three months or less left on a fixed-rate deal might start looking around right now as lenders can sign up new landlords to a future deal that begins in a few months’ time. The rates for buy-to-let mortgages tend to be higher because they are seen higher-risk. One positive angle for landlords to consider is that there is still a shortage of properties available for people to rent in major cities, such as London. So if mortgage rates rise it may be worth (and viable to) consider raising the rent rather than simply selling up.
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