Buy-to-let prices have risen to their highest level in more than a year as turmoil in the Middle East causes a sharp rise in the cost of borrowing for UK landlords.
The average two-year rate for homeownership rose from 4.66 per cent at the start of March to 5.29 per cent on 26 March, according to Moneyfactscompare.co.uk, marking the highest level since February 2025.
Five-year fixed rates also rose sharply, rising from 5.05 percent to 5.63 percent over the same period, reaching a peak not seen since January 2024.
For homeowners with a mortgage of £250,000 over 25 years, this increase translates into around £1,100 in extra annual costs.
Rising energy prices linked to the conflict have pushed up exchange rates, which lenders use as an important means of buying credit products.
Rachel Springall, financial expert at Moneyfactscompare.co.uk, said: “The unrest in the Middle East has caused complete chaos in the mortgage market, with buy-to-let rates also being pushed up, and hundreds of deals being withdrawn from sale.
“The good vibes going into 2026 are ruined.”
Property analysts have pointed out that tenants could eventually face higher rents as landlords respond to increased borrowing costs.
David Fell, chief analyst at Hamptons, said: “The last time mortgage rates rose towards the end of 2022, the higher costs of homeownership were passed on to renters through rapidly rising rents.”
Homeowners face rising borrowing costs amid ongoing Middle East conflict
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He said that the people who would be tenants were forced to enter the price wars to save the houses, while the existing tenants increased despite the years of fixed costs.
Mr Fell added: “If interest rates remain high, there is a risk that we will see a second cycle of high rental growth.”
Homeowners are also facing a reduced number of mortgage products available as lenders pull deals from the market.
Around 1,300 buy-to-let agreements have been withdrawn since the start of March, leaving lenders with fewer options.
The cost hike comes ahead of major regulatory changes set to take effect.
Keir Starmer’s Employers Bill of Rights is expected to come into effect from May
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The Employers’ Bill of Rights will come into effect on May 1, introducing reforms that include the abolition of section 21 “no-fault” dismissals and the removal of fixed-term contracts.
The law will also introduce restrictions on rent increases, limiting landlords’ ability to adjust payments in response to rising costs.
Ms Springall said: “Seeking professional advice will be essential for new and existing landlords to keep up with the changing legal landscape as well as the rising cost of borrowing.”
Industry groups have raised concerns about the combined effect of higher mortgage rates and regulatory pressures on the rental sector.
Megan Eighteen, President of ARLA Propertymark, said: “Rising mortgage rates will put additional pressure on many landlords at a time when they are already struggling with significant regulatory burdens and costs.”
He said there was a “real concern” that some landlords could leave the sector because of rising costs, which could worsen the housing supply shortage.
Additional financial pressures are also emerging for homeowners over housing costs and regulatory changes.
New Making Tax Digital requirements that come into effect in April will require those earning more than £50,000 a year to file quarterly tax returns.
Industry experts have also warned that meeting Energy Performance Certificate standards by October 2030 could cost homeowners up to £10,000 per property.
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