Costs surge for landlords as more refinance onto rates above 5%, says Hamptons

Data from Hamptons showed that in April, 43% of all new BTL lending was agreed at a rate of 5% or above, up from a share of 8% of new loans in January. The firm said this brought borrowing costs back to levels last seen in December 2023. 

Its analysis of Connells Group data showed that the average mortgage rate of a mortgage secured by a landlord rose in 4.84% in April, up from 4.2% in January. So far this month, a typical BTL landlord taking out a two-year fix has secured a rate of 4.73%, 0.63% higher than the average rate available in January, and the typical five-year fixed rate was 0.74% higher than the start of the year at 4.94%. 

The rise in rates saw landlords coming off two-year deals in April facing a 3.4% rise in monthly mortgage payments, while those refinancing from cheaper five-year deals secured in 2021 saw a payment shock of 28.5%. 

Hamptons said that because most BTL borrowing was on interest-only terms, monthly payments tended to rise significantly when rates did. It said a rise from 2% to 4% would double payments on an interest-only mortgage, while on a repayment loan, this would represent a 29% increase. 

On a £150,000 mortgage, this would equate to a £250-per-month increase on an interest-only loan, compared to £162 on a repayment mortgage. 

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Turn to shorter-term fixes 

To limit the impact of borrowing costs, Hamptons said landlords were selecting cheaper, shorter-term products. 

The average rate of a two-year fix has been lower than its five-year equivalent since May last year, with the latter costing £26 more each month. 

In April, two-year fixes accounted for 48.3% of new lending to landlords, while five-year fixes made up a third. Hamptons said in the first four months of this year, landlords took out more two-year deals than five-year options. 

Hamptons said this mirrored what happened when rates rose in 2022, when borrowers opted for shorter-term deals in the hopes that rates would fall soon. 

Landlords pay off debt during remortgage to lower costs 

To further reduce costs, landlords are reducing their mortgage balances when remortgaging. 

So far this year, two-fifths of landlords on interest-only deals injected cash when they remortgaged, up from 34% last year. 

Hamptons said this was more common among landlords on higher-loan-to-value (LTV) tiers, where rates tended to be higher and impacted the gains on rental income. 

Some 65% of landlords with less than 20% equity paid down their debt when remortgaging, compared to 35% of landlords with 40% or more in equity. 

The average downpayment during a remortgage was £30,200, reducing the outstanding mortgage balance by around 18.1%. This is broadly unchanged from last year and reduces the average LTV from 61.6% to 55.2%. 

Around two-thirds of the reductions in average LTV were due to landlords overpaying on their debt, while the remaining third was because of house price growth. 

Rates are shaping landlord behaviour 

Aneisha Beveridge, head of research at Hamptons, said: “Rising mortgage rates are once again shaping landlord behaviour, as many look for ways to manage higher borrowing costs. The last time interest rates rose sharply back in 2022, they unleashed record rental growth. 

“Landlords were able to pass higher mortgage costs on to tenants as would-be buyers increasingly chose to rent until rates began falling back, stoking demand for rental homes. In effect, three or four years of typical rental growth were squeezed into the space of 12 months.” 

Rental growth picks up again 

Hamptons’ analysis showed that rental growth was starting to speed up again, after slowing down for most of last year. 

The annual rate of rental growth on newly let homes was 1% in March, double the 0.5% rate recorded in February. 

The firm said this was driven by Inner London, where rents rose 4.1% in the year to March. Rental growth in the city has reversed the declined recorded over 2025. 

Tenant demand rose sharply in March, with a 24% increase in the number of tenants seeking a new rental home. Every region across Britain saw a double-digit increase in rental demand. 

However, there are 1% fewer rental homes available compared to last year, and the number of properties on the market is a third down on 2019. 

More tenants have been renewing contracts too, as the share of rents on renewals increased by 3.1% on average, compared to the four-year low of 2.2% in February. 

Despite this, Hamptons said there was less competitive bidding among tenants as rental growth slowed. In the first quarter of this year, just 6% of homes were let above their advertised rent, compared to 56% in the first quarter of 2021. 

Beveridge added: “While rents fell last year, early signs suggest the pace of rental growth is beginning to pick up as tenant demand rebounds and mortgage rates rise. The falls recorded in 2025 have already been wiped out, while the 24% annual increase in tenants starting the search for a new home in March was the largest since our records began. 

“While stronger rental growth may help landlords balance the books over the medium to long term, mortgage stress tests mean they must also remain profitable in the short term, even at higher rates. For many, that means keeping mortgage payments at an affordable share of the rent – whether by paying down debt or moving over to interest-only deals with lower monthly costs.”