Rising Interest Rates: Understanding Their Impact on Renters and Landlords

The Bank of England’s Monetary Policy Committee (MPC) primarily dictates interest rates in the UK. These rates determine the cost of borrowing money, such as mortgages, for individuals and businesses. When the MPC raises interest rates, borrowing becomes more expensive.

In the 12 months leading up to March 2022, average rent across the UK surged by 10.2%, the highest annual increase since 2016. This upward trajectory is primarily attributed to rising interest rates. As borrowing costs climb, landlords increasingly pass these expenses to tenants through higher rent.

The Bank of England’s decision to continue to hike interest rates has affected renters and landlords. These rate increases have made it more expensive for landlords to finance their properties, putting pressure on their profit margins. As a result, more landlords are contemplating rent increases to offset the rising costs.

Impact on Landlords

Rising interest rates make it more expensive for landlords to borrow money to purchase or refinance rental properties. This can lead to higher mortgage payments, reducing landlords’ profits or making it difficult for them to make ends meet. As a result, some landlords are choosing to sell their properties rather than continue to operate at a loss.

The introduction of the Renters Reform Bill would also make it more difficult for landlords to evict tenants. This includes banning no-fault evictions, which do not require a tenant to commit wrongdoing.

These changes could make it more difficult for many landlords to manage their properties and increase their risk of losing money. As a result, some landlords are choosing to sell their properties before the bill comes into effect.

The current economic climate, characterised by rising interest rates, has created a dilemma for landlords. On one hand, they face the pressure to raise rents to cover their increasing expenses. On the other hand, they risk losing tenants if rents become too high. Additionally, many landlords are considering selling their properties altogether due to the financial strain and uncertainty surrounding the future of the rental market.

Impact on tenants

One of the most immediate and direct impacts of rising interest rates on tenants is an increase in rent costs. Landlords typically borrow money to finance their properties, and when interest rates rise, their borrowing costs also increase. As a result, landlords often pass on these increased costs to their tenants through higher rent.

Rising rent costs can place a significant strain on tenants’ finances. This can make it difficult for tenants to afford other necessities, such as food, household bills and transportation.

Practical steps for landlords

While rising interest rates may pose challenges for some residential property landlords, they also present a unique opportunity for those willing to adapt and strategise. As the rental market transitions, astute landlords can capitalise on emerging trends and position themselves for better long-term success.

The potential exodus of some landlords from the rental market due to rising interest rates is expected to exacerbate the existing shortage of available rental properties, especially in London and the South East.

This scarcity will likely translate into higher rents for desirable properties in prime locations, allowing landlords to enhance their returns on investment.

An Opportunity for Enhanced Tenant Relationships and Reduced Risk

High interest rates, rising rents, and the proposed Renters Reform Bill, which aims to ban no-fault evictions in England, allow property landlords to refine their tenant selection processes and foster stronger, more secure tenant relationships.

By carefully evaluating potential tenants and establishing clear expectations from the outset, landlords can minimise the likelihood of encountering issues that may necessitate eviction proceedings.

Landlords can foster a culture of mutual respect and responsibility in their rental properties, encouraging tenants to take ownership of their living spaces and uphold tenancy agreements. This proactive approach can significantly reduce the risk of tenant problems or property damage, minimising the need for eviction proceedings.

Strategic Portfolio Diversification

Landlords with high-end, luxury properties can mitigate the impact of rising interest rates by diversifying their portfolios.

Exploring alternative property types, such as short-term corporate lets and student accommodation, which can provide additional income streams, make it easier to adjust rental charges in line with rising interest rates and reduce reliance on traditional long-term residential rentals with less frequent rent increases.

Adapting to Evolving Tenant Needs

Even as interest rates rise, the demand for high-end properties remains strong, and astute landlords can capitalise on this trend by catering to affluent tenants’ evolving preferences. By investing in property upgrades, ensuring regular maintenance, offering flexible rental terms, and fostering a positive tenant experience, landlords can attract and retain high-quality tenants willing to pay premium rents for luxurious living spaces.

Enhancing Property Appeal: Upgrades and Maintenance

High-end property landlords can differentiate their offerings by investing in property upgrades and ensuring regular maintenance. Renovating kitchens and bathrooms, installing modern appliances, and incorporating smart home technology can elevate the property’s appeal and attract tenants who prioritise comfort and convenience as well as energy efficient properties.

Proactively addressing maintenance issues and maintaining the property’s overall condition demonstrates a commitment to providing a superior living environment.

Tailored Rental Terms: Flexibility for Discerning Tenants

Affluent tenants often seek flexibility in their rental arrangements, and landlords who can accommodate these preferences can gain a competitive edge.

Offering a variety of lease durations, considering pet-friendly policies, and accommodating specific tenant requests can attract and retain discerning tenants who value personalised service.

By prioritising tenant satisfaction, landlords can secure long-term leases, reduce vacancy periods, and command higher rents.

Practical steps for tenants

Tenants can implement practical strategies that safeguard their financial well-being and housing security to cope with rising rents and limited availability.

First and foremost, tenants should prioritise meticulous budgeting. Creating a detailed budget that accounts for all income and expenses clearly shows their financial standing. This allows tenants to identify areas to reduce spending, reallocating funds towards rental costs.

Secondly, tenants should actively engage in negotiation with landlords. Open communication and a willingness to compromise can lead to favourable rental agreements. Tenants should research comparable properties to establish a benchmark for fair rent prices. Additionally, they can propose alternative terms, such as longer lease periods or upfront rent payments, to incentivise landlords to offer lower rents.

Exploring alternative housing options can also alleviate the pressure of rising rental costs. Consider sharing an apartment with a friend or talking to your landlord about introducing roommates to reduce individual rental expenses.

Long-Term Trends and Economic Outlook

Richard Brown, Head of Lending at Mortgage Advice Bureau: “The impact of rising interest rates on the rental market is already evident. Rent prices have been increasing steadily in recent months, and this trend is likely to continue as interest rates rise further.”

Zoopla, a leading property website, offers valuable insights into the UK’s rental market and its potential impact on landlords and tenants:

  • Rent prices have steadily increased and are expected to rise by 10% in 2023.
  • Rising interest rates could put upward pressure on rents but could also decrease the number of landlords.
  • The interplay of supply and demand could lead to reduced availability of rental properties and increasing rents.
  • Rising rent prices could make it increasingly difficult for tenants to find affordable housing.

As the rental market evolves, landlords and tenants must adapt their strategies. Landlords can explore alternative property types, enhance tenant satisfaction, and seek expert guidance. Tenants can consider flexible living arrangements, prioritise budgeting, and explore additional income streams.

Seek expert advice

Coping with the ever-changing rental market requires a high level of property management knowledge, expertise and sound financial planning.

Consulting with experienced property management professionals, such as Crown Properties, can provide valuable insights and guidance to help prospective and established landlords make informed decisions and optimise their investment strategies.


Despite the evolving market landscape, high-end property landlords remain well-positioned to thrive by aligning their offerings with the preferences of affluent tenants. By investing in property upgrades, ensuring regular maintenance, offering flexible rental terms, and fostering a positive tenant experience, landlords can attract and retain high-quality tenants, secure premium returns, and establish themselves as leaders in the luxury rental market.