Credits: Investopedia

Rising Mortgage Rates Threaten Rental Market

As many as 735,000 residences could be lost due to increased mortgage rates, experts project that the rental industry in the United Kingdom would face a severe problem. The reduction in tax assistance on mortgage interest repayments, which has forced landlords to sell their properties, has worsened this impending catastrophe. However, the restoration of tax benefits for real estate investors offers a potential remedy. The impact of rising mortgage rates, the corporations engaged, and the possible repercussions of changing the tax policy are all questions which many people are now asking.

The Rising Mortgage Rates and Landlord Exodus:

The findings of Capital Economics’ investigation into the rental market are unsettling. It predicts that rising mortgage rates will cause the loss of almost 735,000 rental units by 2027, resulting in a 13% decrease in the overall number of rental properties. The government’s decision to reduce tax assistance on mortgage interest repayments, which resulted in higher expenses for landlords, is what’s causing this flight. Landlords used to be able to deduct mortgage payments from their tax bill, but now they can only do so with a credit worth 20% of their tax cost, which considerably reduces their earnings.

Credits: Hamptons

The Impact on the Rental Market:

The National Residential Landlords Association has issued an urgent demand for a review of the judgement in light of the oncoming catastrophe. Renters are suffering as a result of the “supply crisis” brought on by the fall in tax benefit. Tenants are left with fewer options and increased rents as landlords are compelled to sell their houses. If nothing is done to change the tax policy and lessen the effects of rising mortgage rates, the housing crisis in the UK is only predicted to become worse.

Reversing Tax Changes as a Potential Solution:

According to Capital Economics, restoring tax advantages for real estate owners may be able to stop the sale of 110,000 rental homes. This policy would lessen the burden on the rental market and lessen the housing crisis by offering financial relief to landlords. But doing so would cost the Treasury £400 million in foregone income and company tax, according to estimates.

Companies Involved and their Stance:

The National Residential Landlords Association has been vocal in its support for the tax change’s repeal. Ben Beadle, the company’s chief executive, emphasises the necessity for the government to put economic realism ahead of political pride. The group claims that the supply situation has gotten worse as a result of landlord tax increases and rising loan rates. They want to protect rental properties, prevent rent rises, and raise Treasury revenue, thus they are calling for a strong rejection of these harmful policies.

Potential Impact of the Move:

Reversing the tax law and reinstituting mortgage interest deductions would be advantageous for landlords as well as for tenants and the Treasury. Restoring tax breaks might reduce rent rises and lower housing costs for tenants. Landlords’ financial constraints would also be lessened, giving them more money for upkeep and renovations of their properties. Moreover, by promoting a robust rental market, the action might help the Treasury generate more money.


Due to the combination of rising mortgage rates and a decrease in tax assistance on mortgage interest repayments, the rental market in the United Kingdom is at a crucial point. By 2027, 735,000 rental properties could be lost, underscoring how urgent it is to address this situation. One of the most important steps towards reducing the consequences of rising mortgage rates, restricting rent rises, and increasing Treasury income could be to reverse the tax policy by returning tax breaks for property investors. The request for a review of the ruling by the National Residential Landlords Association is an appeal to put economic realities before political pride. The government must take these issues into account and act proactively to maintain the stability and accessibility of the rental market for both landlords and tenants. The government can assist stop the loss of rental properties and ease the escalating housing crisis by putting policies in place that promote the rental sector.