Landlord mortgage interest costs reached £15 billion a year during 2023. This represented a 40% annual increase, according to Hamptons’ September 2023 Monthly Lettings Index.
The rise showed how quickly a change in borrowing costs could affect an entire property portfolio. For mortgage brokers, the research also reinforced the need to review rental cover, leverage and product end dates together.
At a Glance
- UK landlords were paying £15 billion in annual mortgage interest during 2023.
- This was £4.3 billion more than one year earlier.
- Higher tracker rates, new borrowing and expiring fixed deals drove the increase.
- Interest represented a growing share of rental income.
- Portfolio reviews became increasingly important before refinancing.
- The figures are a historical 2023 market snapshot, not current mortgage pricing.
What Caused Landlord Mortgage Interest Costs to Rise?
The increase was not caused by one event.
Three separate forms of borrowing were moving into a higher-rate environment:
- Tracker mortgage payments rose as Bank Rate increased.
- New purchases completed at higher mortgage rates.
- Older fixed-rate products ended and moved to more expensive terms.
These changes affected landlords gradually because fixed-rate mortgages ended at different times.
This created a delayed effect. The Bank Rate had already increased, yet many landlords remained temporarily protected by earlier fixed-rate products. The full cost only became visible as those products expired.
The original Hamptons landlord mortgage interest research reported that annual interest costs had risen by £4.3 billion in twelve months.
What Did the 2023 Figures Show?
The average rate across outstanding landlord mortgage debt stood at 3.4% in August 2023.
At that rate, landlords were collectively paying about £15 billion in mortgage interest each year.
Hamptons calculated that the annual interest bill could have reached:
- £17.9 billion at an average rate of 4%
- £22.4 billion at an average rate of 5%
- £26.8 billion at an average rate of 6%
These were modelled scenarios rather than forecasts or product quotations. However, they demonstrated how sensitive leveraged property portfolios can be to relatively small rate changes.
A mortgage rate is not simply a price attached to one property. Across several properties, it becomes a measure of how much financial pressure the portfolio can absorb.
Mortgage Interest Used More Rental Income
Mortgage interest accounted for approximately 26% of all UK rental income during the period covered by the research.
Among landlords with mortgage debt, the proportion was higher. Interest absorbed about 37% of their rental income, compared with 24% in November 2021.
This calculation did not include every other landlord cost.
A landlord may also need to allow for:
- Property maintenance
- Insurance
- Letting and management fees
- Empty periods
- Licensing costs
- Tax
- Safety checks
- Service charges
- Unexpected repairs
Rental growth could offset part of the increase. However, a higher rent did not automatically create a stronger net position.
The important measure was the income remaining after finance and operating costs.
Higher Proportion
The study highlights that higher mortgage rates will increase the share of rental income allocated to mortgage interest. At an average outstanding rate of 4%, 43% of rental income will be allocated to mortgage interest. This will rise to 54% at 5% and 64% at 6%.
In addition to these financial dynamics, the report notes that annual rental growth nationwide remained in double digits in September. The average cost of a new let increased by 11.7% compared to the same period a year ago. This marks the second-fastest increase on record, surpassed only by August’s figure of 12%. The average rent in the UK has now reached £1,325 per month, up from £1,186 a year ago.
Notably, rents are rising faster in London than in other regions. The average cost of renting a property in Greater London is now £2,376 per month, 15.7% higher than last year.
In contrast, Wales recorded the lowest annual rent growth. Over the same period, it increased by 5.2% to £791 monthly.
Aneisha Beveridge, Head of Research at Hamptons, emphasises the impact of rising mortgage interest rates on landlords. She states that it has become their highest cost. Even if the Bank of England doesn’t hike rates further, Beveridge anticipates significant increases. The mortgage interest paid by landlords could exceed £20 billion over the next two years. This can consume just over half of the rent that mortgaged landlords receive. This highlights the financial strain on this segment of property investors.
What the Increase Meant for Mortgage Applications
Higher interest costs affected more than monthly cash flow. They could also change whether a case passed lender assessment.
Buy-to-let lenders commonly consider:
- Interest coverage ratio
- Rental stress testing
- Loan-to-value
- Property type
- Landlord experience
- Personal or limited company ownership
- Existing portfolio borrowing
- Wider credit commitments
For landlords with four or more mortgaged properties, lenders may assess the complete portfolio rather than only the property being financed.
Our portfolio landlord guide explains the information brokers may need to prepare for these applications.
Ownership structure can also affect lender criteria and tax treatment. Brokers supporting incorporated landlords can read our limited company buy-to-let guide.
Mortgage advisers should not provide tax advice unless qualified to do so. Landlords considering a company structure should also speak with a suitably qualified accountant or tax professional.
Practical Steps for Brokers Supporting Landlords
The 2023 figures showed why a landlord review should begin before a mortgage product ends.
A structured review may include:
- Recording every mortgage balance and product end date.
- Checking current rent against lender stress tests.
- Reviewing the loan-to-value of each property.
- Identifying properties with weak net cash flow.
- Allowing for voids, maintenance and management costs.
- Checking whether capital may be needed at remortgage.
- Reviewing the landlord’s future purchase or sale plans.
- Preparing an accurate portfolio schedule.
The cheapest headline rate may not produce the strongest overall outcome. Fees, rental calculations, stress rates and future flexibility can all affect suitability.
Landlords seeking advice can use Connect Experts to find a portfolio landlord mortgage adviser. Connect Experts is an adviser directory and matching platform. Advice is provided by the adviser or firm selected by the customer.
Why Network Support Matters
Portfolio landlord cases can involve several connected areas.
A client may require a standard buy-to-let remortgage, limited company finance, an HMO mortgage, bridging finance or commercial property funding. The application may also require detailed packaging and compliance records.
Connect for Intermediaries supports mortgage advisers across mainstream and specialist lending. This includes lender access, case placement, compliance guidance, training and practical business support.
Experienced brokers can learn more about joining Connect Network.
A Historical Market Lesson
The £15 billion figure reflects the landlord mortgage market during 2023. It should not be treated as a current mortgage rate or a prediction of future costs.
Its lasting lesson is practical.
Borrowing conditions can change before the full effect appears within a portfolio. Good planning, therefore, begins with the complete financial position, not only the next mortgage application.
For landlords, resilience comes from understanding the cost of debt. For brokers, it comes from asking the right questions before that cost becomes urgent.
