This comes ahead of the rollout of the Renters’ Rights Act on May 1 which promises to improve tighten regulations on UK landlords
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Landlords are racing to pay off their mortgage debts and change over to interest-only deals as borrowing costs are pushed up by the Iran War.
Four in 10 landlords renegotiating interest-only deals have paid off around £30,100 towards their loan since January to keep monthly payments down, according to Hamptons.
Analysis by the estate agency showed a distinct increase in mortgage rates since the joint US/Israeli strikes on Iran on February 28.
Skyrocketing oil prices have prompted fears of an inflation shock, making it more likely that central banks could raise interest rates.
Read more: This is why the Iran War is hitting your bills and what might happen next
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Around 43% of new buy-to-let mortgage deals charged a rate of 5% or more this month, the estate agency confirmed.
At the start of the year, the mortgage rates were that high for just 8% of new landlords.
Over three-quarters (78.4%) of new buy-to-let lending was on an interest-only basis so far this month, marking the highest level since October 2022.
The average two-year buy-to-let mortgage rate was 5.43%, financial analyst Moneyfacts revealed on Friday.
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The average for a five-year fixed-rate mortgage was 5.73pc, compared with 4.65pc and 5.05pc at the end of February.
Monthly payments typically rise when interest-only mortgage rates increase.
This means that a landlord on an interest-only deal, who switched from a 2pc to a 4pc mortgage, would face their payments doubling – compared with a 29pc increase on a repayment loan, according to Hamptons.
This equates to a £250-a-month increase on a typical £150,000 mortgage on an interest-only basis, as compared to £162 on a repayment deal.
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This comes ahead of the highly anticipated rollout of the Renters’ Rights Act on May 1, which promises to bring in new rules for rental homes, including doing away with Section 21 “no-fault” evictions.
The new legislation will stop landlords from raising rent more than once a year, as well as discriminating against tenants on benefits, or accepting offers above the listed rent.
Renters will be given the ability to challenge “above-market” rent increases through tribunals.
The new rules have been met with backlash from landlords, who claim it may force them to sell their properties.