Landlords could push up rents more quickly after the first interest rate rise for 10 years and could lead to the sector being 'galvanised', according to the Landbay Rental Index.
The founder of Landbay, John Goodall, said that landlords have been facing several challenges in recent years from tax relief reductions to strict regulations.
He said: “Despite these pressures, there's been little sign of landlords passing on costs in the form of higher rents to tenants.
“With record low mortgages, they have been able to absorb some costs, especially those who are wary of tenants with negative wage growth so the rise could make a difference.
“The 0.25% increase may look small to the markets but could spook landlords, particularly those wanting a long-term tenancy.”
Galvanise landlords to increase rents
Mr Goodall says that while the quarter of one percent increase will not have a big impact on rents overnight, it might galvanise landlords to increase rents in the face of regulatory and tax changes.
He added that the situation for landlords has 'been building for a while now'.
While many landlords may be unaffected by the rate rise, others may be and they are being encouraged to look at their profitability under the new climate.
One landlord insurance organisation says that landlords should:
- Check their current mortgage rate. See how the current rate compares with other deals available and opt for cheaper alternatives.
- Look at the future mortgage options. For landlords remortgaging they should consider carefully the type of deal they want whether that's a tracker or a fixed rate mortgage.
- Paying a large mortgage fee. Some landlords should look carefully at the cheapest rate since they tend to have the highest fees so a larger mortgage amount may cost less to borrow.
MP calls for longer term tenancy incentives
Meanwhile, the Conservative MP Kevin Hollinrake is calling for landlords who offer longer tenancies to benefit from mortgage interest relief adjustments.
He made his suggestion during a debate being held in Parliament.
Mr Hollinrake pointed out that longer tenancies should be a voluntary option for landlords but they should be incentivised to do so.
He explained: “Perhaps there should be dispensation on how we treat mortgage interest for the private rental sector.”
Among the organisations calling for tax incentives to encourage longer term tenancies is the Residential Landlords’ Association which supports the MP’s comments.