With heightened geopolitical uncertainty, borrowing costs have been on the rise. For the housing market this has meant mortgage rates have risen sharply over the last month, pushing a growing share of buy-to-let borrowing above the 5% threshold and materially increasing costs for landlords.
Hamptons’ analysis of Connells Group data shows that the average mortgage rate secured by a landlord in April has risen to 4.84%, up from 4.20% in January. So far this month, the average landlord taking out a two-year fixed-rate product secured a rate of 4.73% (+0.63% since January), while the average investor opting for a five-year fix paid 4.94% (+0.74%).
As a result, 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. This has materially increased borrowing costs for landlords.
Landlords rolling off two-year fixed-rate deals in April saw monthly mortgage payments rise by 3.4%. Meanwhile, those reaching the end of cheaper five-year deals taken out in 2021 have seen payments rise by 28.5%.
WHY HIGHER RATES BITE HARDER FOR BUY-TO-LET
Since most buy-to-let borrowing is interest-only, monthly payments rise sharply when rates increase. A move from 2.0% to 4.0% would double payments on an interest-only mortgage, compared with a 29% rise on a repayment loan. On a typical £150,000 mortgage, that equates to a £250 a month increase on an interest-only basis, versus £162 on a repayment deal.
As a result, landlords have responded by increasing their use of interest-only mortgages, paying down debt when remortgaging, and moving towards cheaper short-term mortgage products.
INTEREST-ONLY BORROWING BECOMES THE DEFAULT
One of the clearest responses to higher rates has been a further move towards interest-only borrowing, particularly on new purchases.
So far this month, more than three-quarters (78.4%) of lending on new buy-to-let purchases has been on an interest-only basis. This is the highest level since October 2022, when interest rates last peaked, and up from 71.1% in January 2026. However, the share of landlords remortgaging onto interest-only deals has remained broadly flat.
At higher interest rates, the shift to interest-only borrowing lowers monthly payments, but without reducing the total amount owed. This allows 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 £258 a month difference. In cash terms, this is the largest gap since September 2022, when mortgage rates 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.
So far 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 rises in interest rates 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 they came to remortgage, compared with 35% of landlords with 40% or more equity. At higher interest rates, lower-equity landlords face a greater squeeze on profits, encouraging debt reduction.
This year, the average downpayment at the point of remortgage was £30,100, equivalent to reducing the outstanding mortgage balance by 18.1%. This is broadly unchanged from last year and reduces the average LTV on remortgages from 61.6% to 55.2%. Around two-thirds of this reduction in average LTV came from overpayments made by landlords, with the remaining third resulting from house price growth over the term of the mortgage.
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 opting for a longer deal.
Borrowers typically gravitate towards products that deliver the lowest monthly payments. As a result, 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.
This lending profile mirrors what happened when rates spiked in 2022. Back then, landlords bet that rates wouldn’t remain high for long and expected to refinance onto cheaper deals in the near future. A similar dynamic is emerging in 2026, even though financial markets indicate rates will remain higher for longer.
RENTAL GROWTH
Rising mortgage rates are once again shaping landlord behaviour, as many look for ways to manage higher borrowing costs. 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.
After falling through much of 2025, rents are now accelerating. The pace of rental growth on newly let homes picked up slightly in March, with annual growth across Great Britain doubling from 0.5% in February to 1.0%.
The increase was driven primarily by Inner London, where rents rose 4.1% over the year to March. The past two months have reversed the decline recorded in Inner London since the beginning of 2025.
In March, there was a 24% annual increase in the number of tenants looking for a new rental home, the largest rise since our records began. Every region in Great Britain recorded a double-digit increase in tenant demand.
Meanwhile, there were 1% fewer homes available to rent than a year earlier. Compared with March 2019, there are now 33% fewer properties available on the rental market.
There has also been a similar rebound in rental growth for tenants renewing their contracts. In March, rents on renewals 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 reduced competitive bidding among tenants. In the first quarter of 2026, just 6% of homes were let above their advertised rent, down sharply from 56% in the first quarter of 2021.
March also marked the penultimate month in which landlords in England were able to accept rental offers above the advertised price, changing how prices are set rather than how high they ultimately rise.
Looking ahead, if rental growth continues to accelerate, there is likely to be a divergence between advertised and agreed rents after the Renters’ Rights Act comes into force. Advertised rents are likely to move from acting as a floor to a ceiling, potentially encouraging landlords to set them higher at the outset to avoid becoming a cap.
