A new law and current events are creating ‘a perfect storm’
Tenants are being warned as events conspire against them. Experts warn rents could surge as buy-to-let mortgage repayment costs increase by an average of £1,100 annually amid the Iran conflict, creating a “perfect storm” for landlords. Buy-to-let fixed mortgage rates are climbing due to Middle East tensions, according to the latest research from Moneyfactscompare.co.uk.
Landlords are also confronting additional financial pressures over the coming years to comply with new private rental regulations. Average buy-to-let fixed rates over two or five-year terms have increased since early March 2026. Earlier this week, the two-year rate reached its highest point in a year at 5.40 per cent, while the five-year rate hit its highest level in two years at 5.91 per cent – with the situation evolving daily.
Borrowing costs for those securing a two-year fixed deal are now £1,100 higher compared to early March 2026, based on a £250,000 loan over a 25-year term. Overall, buy-to-let product availability has dropped sharply, by approximately 1,300 deals since early March. Choice last fell below 5,000 in November 2025. Landlords are also preparing for the Renters’ Rights Act, which takes effect this May, and will be required to invest up to £10,000 to achieve an Energy Performance Certificate (EPC) rating of C by October 2030.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, warned: “Soaring borrowing costs will cause pain to landlords this year, as they join millions of consumers facing higher mortgage repayments. This is terrible news, as rising costs could lead to higher rental payments for tenants, or a drop in the pool of properties available for rent if landlords decide enough is enough and sell off their portfolio.
“The unrest in the Middle East has caused absolute mayhem in the residential mortgage market, buy-to-let rates are also being hiked, and hundreds of deals have been pulled from sale. The positive sentiment entering 2026 has been shattered and landlords not only have to face higher borrowing costs, but also prepare themselves for the Renters’ Rights Bill, which comes into effect at the start of May 2026.”
Zaman Sheikh, director of Northwood Chelmsford and WN properties estate and lettings agents in Shenfield and Chelmsford, described it as a “perfect storm” for landlords.
He added: “Smaller landlords are currently facing a perfect storm of increased regulatory and borrowing costs. For many, higher mortgage rates have acted as the final straw and they are choosing to exit the sector altogether. The red tape of the Renters’ Rights Act has been made significantly worse by the sharp increase in fixed-rate mortgages and many small buy-to-let investors with just one or two properties are now looking at reallocation of their capital into alternative forms of investment.
“Buy-to-let was already an uphill slog and, with mortgage rates soaring, it has now become an Everest. Landlords of all sizes are being forced to reassess their portfolios and are now laser-focused on Return on Investment (ROI) and yields. We’re seeing a lot of London landlords sell up as yields in the capital are too low to make it worth the risk.
“Many are now looking to areas just outside London where yields are still reasonable. Tenants are clearly also vulnerable as, in many cases, landlords will have no choice but to pass on the cost of higher mortgage rates. It’s a challenging time right now.”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, warned that numerous landlords would be compelled to raise rents for tenants.
He continued: “Sharply increasing mortgage rates due to the war in Iran will prove extremely painful for landlords looking to buy or coming off their current deal. The entire mortgage market has been turned upside down in March. In theory, rate volatility has always been a known risk, with landlords riding out high volatility periods by spreading the risk over multiple properties and increasing their rents.
“However, taxation and regulatory changes both recent and forthcoming are the real reasons many landlords are looking to exit. Those that remain will be forced to increase rents putting real pressure on tenants’ already stretched finances. Successive governments have consistently attacked landlords, with tenants mostly eventually paying the price.”
Rohit Parmar-Mistry, founder at Burton-on-Trent-based Pattrn Data, suggested it would result in landlords selling up.
He continued: “If buy-to-let rates are jumping again, the story is not ‘landlords in pain’. It’s ‘tenants about to pay for policy and market chaos they didn’t cause’. Some landlords will try to push rents up, but many simply can’t. Wages and benefits cap what people can pay, and voids are expensive. The more likely outcome is a quiet exit: smaller landlords selling, less choice, and a more professionalised rental market with higher barriers to entry.
“The looming Renters’ Rights changes and the EPC push are both defensible in principle, but the sequencing is brutal. You can’t tell people to invest thousands in upgrades, tighten compliance, and then pull product choice and hike finance at the same time.”
