Landlords are coming under increasing financial strain as arrears and repossessions rise, with higher mortgage costs set to add more pressure ahead of the introduction of the Renters’ Rights Act on 1st May.

Data from UK Finance for the last three months of last year reveals that 770 buy-to-let properties were taken into possession, while 9,520 mortgages were in arrears. It is up 10% from 700 in the same period a year earlier.

It is the latest evidence of growing pressure on landlord finances before recent rises in borrowing costs have even fully taken effect.

Profitability of buy-to-let has been damaged.”

Rachel Springall (pictured), Finance Expert at Moneyfacts, told MoneyWeek: “Tough times are ahead for landlords as the profitability of buy-to-let has been damaged due to tighter legislation, and with rising running costs eating into profit margins, it is squeezing them from all sides.

“It is worrying to think that landlords could be failing to keep up with mortgage repayments.

“In the months ahead, the cost of living is predicted to worsen, and this will be magnified if landlords are due to come off a cheap fixed rate, because mortgage rates have been rising.”

Significant increases

Data from Moneyfacts shows landlords taking out a typical £250,000 buy-to-let mortgage in mid-April face repayments around £1,300 a year higher than at the start of March, as rates have risen from 4.66% to 5.45%, significantly increasing monthly outgoings.

According to Hamptons, rising costs are already forcing landlords to adapt, with a shift towards interest-only borrowing to reduce monthly payments, alongside shorter fixed-rate deals as they try to limit costs in the near term. Some landlords are also injecting cash when remortgaging to bring down loan balances and stay within affordability thresholds.