A recent survey conducted by mortgage lender, Landbay, provides insights into how landlords navigate rent adjustments amidst increasing mortgage rates.

The survey found that 18% of landlords indicated their commitment to maintaining current rents despite experiencing mortgage rate increases, but a substantial 61% voiced their readiness to raise rents. Notably, 21% of landlords remained uncertain about the course of action they would adopt.

Rental hikes over the past year have been a common phenomenon, as 76% of landlords made the decision to adjust rent rates. Among the primary drivers for this step, approximately 51% of respondents cited the need to offset rising mortgage costs. A further 24% of landlords relied on advice from letting agents when determining their rent increases.

The reasons behind rent adjustments showcased diversity, with landlords citing various factors. Apart from covering increasing mortgage costs, other motivations included meeting maintenance and repair expenses, tackling higher taxation and energy bills, and adhering to the customary practice of annual rent raises.

Landlords' expectations regarding rent increases reflected a spectrum of perspectives. While 38% of respondents envisaged rent hikes ranging between 6% and 10%, a more conservative 27% expressed their intention to limit rent adjustments to a maximum of 5%.

Among the landlords who chose not to raise rents, their decision stemmed from the fact that their existing rental income adequately covers both mortgage payments and other expenses. However, it's worth noting that a segment of landlords absorbed losses to retain desirable tenants, while others opted for a temporary postponement of rental increases.

Paul Brett, managing director, intermediaries at Landbay, provided valuable insights into the challenges faced by landlords grappling with increasing mortgage interest rates. In response to these challenges, Landbay introduced new product developments, including like-for-like two-year fixed rate remortgages, which offered landlords a more manageable stress test for affordability. The affordability criteria was based on the pay rate plus 1%, rather than the more conventional 2%. Additionally, Landbay observed an emerging trend of landlords opting for 2-year terms, prompting the launch of 2-year discounted trackers with no early repayment charges. This enhanced flexibility allows borrowers to consider alternative products if mortgage rates show signs of improvement.