"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"
- Aneisha Beveridge - Hamptons
Mortgage rates have risen sharply over the past month, pushing a growing share of buy-to-let borrowing above 5% and materially increasing costs for landlords across England.
Analysis by Hamptons, using Connells Group data, shows the average mortgage rate secured by a landlord in April has risen to 4.84%, up from 4.20% in January. The average landlord taking out a two-year fixed-rate product secured a rate of 4.73%, up 0.63 percentage points since January, while those opting for a five-year fix paid 4.94%, up 0.74 percentage points.
By early April, 43% of all new buy-to-let lending was agreed at a rate of 5% or above, up from just 8% in January and back to levels last seen in December 2023.
Landlords rolling off two-year fixed-rate deals in April saw monthly mortgage payments rise by 3.4%, while those reaching the end of cheaper five-year deals taken out in 2021 have seen payments climb by 28.5%.
Why higher rates bite harder for buy-to-let
Because most buy-to-let borrowing is interest-only, monthly payments rise sharply when rates increase. A move from 2.0% to 4.0% doubles payments on an interest-only mortgage, compared with a 29% rise on a repayment loan. On a typical £150,000 mortgage, that equates to an additional £250 a month on an interest-only basis, versus £162 on a repayment deal.
Landlords have responded by increasing their use of interest-only mortgages, paying down debt when remortgaging, and moving towards cheaper short-term products.
Interest-only borrowing becomes the default
One of the clearest responses to higher rates has been a further shift towards interest-only borrowing, particularly on new purchases. More than three-quarters (78.4%) of lending on new buy-to-let purchases has been on an interest-only basis so far this month, the highest level since October 2022 and up from 71.1% in January 2026. The share of landlords remortgaging onto interest-only deals, however, has remained broadly flat.
At higher interest rates, the shift to interest-only borrowing lowers monthly payments without reducing the total amount owed, allowing landlords to maintain cash flow and pass lender stress tests.
On a typical landlord purchase during April 2026, a repayment mortgage cost an average of £828 a month, compared to £580 on an interest-only deal, a gap of £258. In cash terms, this is the largest difference since September 2022, when mortgage rates last spiked.
More landlords inject cash at remortgage
Alongside interest-only borrowing, more landlords are also reducing their mortgage balances upfront to keep monthly payments manageable. In 2026, 40% of landlords on interest-only deals injected cash when they remortgaged, up from 34% in 2025.
This strategy is particularly common among landlords with higher loan-to-value (LTV) mortgages, where rate rises have a larger impact on monthly costs relative to rental income.
Landlords with less equity have been more likely to reduce borrowing. This year, 65% of those with under 20% equity paid down debt when remortgaging, compared with 35% of landlords with 40% or more equity. At higher rates, lower-equity landlords face a greater squeeze on profits, making debt reduction more pressing.
The average downpayment at the point of remortgage was £30,100, equivalent to reducing the outstanding mortgage balance by 18.1%. This reduces the average LTV on remortgages from 61.6% to 55.2%, with around two-thirds of that reduction coming from overpayments and the remaining third from house price growth over the mortgage term.
Shorter fixes gain favour
To further limit borrowing costs, landlords are increasingly opting for cheaper short-term mortgage products. Two-year fixes have been cheaper than five-year fixes since May 2025, with the pricing gap equivalent to an extra £26 a month in interest for the average landlord choosing a longer deal.
Two-year fixes accounted for 48.3% of mortgage lending to landlords so far in April, compared to 33.0% for five-year fixes. In each of the first four months of 2026, landlords took out more two-year deals than five-year deals, a pattern that mirrors what happened when rates spiked in 2022.
Back then, landlords bet that rates wouldn't remain high for long and anticipated refinancing onto cheaper deals before long. A similar dynamic is emerging now, even though financial markets indicate rates will remain higher for longer.
Rental growth
After falling through much of 2025, rents are beginning to accelerate. Annual rental growth on newly let homes across Great Britain doubled from 0.5% in February to 1.0% in March, driven primarily by Inner London, where rents rose 4.1% over the year, reversing the decline recorded there since the start of 2025.
Tenant demand is also rising sharply. March saw a 24% annual increase in the number of tenants searching for a new rental home, with every region in Great Britain recording a double-digit rise. Meanwhile, the number of homes available to rent fell 1% year-on-year, and compared with March 2019, there are now 33% fewer rental properties on the market.
Rents on renewals are recovering too. In March, renewal rents rose by an average of 3.1% over the year, up from a four-year low of 2.2% in February.
Slower rental growth has eased competitive bidding among tenants. Just 6% of homes were let above their advertised rent in the first quarter of 2026, down sharply from 56% in the same period in 2021.
March also marked the penultimate month in which landlords in England could accept rental offers above the advertised price, ahead of changes brought in by the Renters' Rights Act. If rental growth continues to accelerate, a divergence between advertised and agreed rents may emerge once the Act comes into force, with advertised rents shifting from acting as a floor to a ceiling, potentially encouraging landlords to set them higher at the outset.
"Rising mortgage rates are once again shaping landlord behaviour, as many look for ways to manage higher borrowing costs," said Aneisha Beveridge, head of research at Hamptons.
"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."
"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."
Beveridge concludes, "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."
