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Landlord mortgage costs have soared by more than £1,100 due to US President Donald Trump's war with Iran and could climb even higher.
Interest rates for two-year fixed buy-to-let mortgages for landlords are already more expensive than a year ago, warns mortgage monitor Moneyfacts.
Deals could reach even higher costs as landlords face more financial challenges.
The buy-to-let mortgage market is already reeling, says Moneyfacts, as rates are hiked and hundreds of loan packages have been withdrawn.
The firm's mortgage expert Rachel Springall explained how the US-Iran war and other factors are denting buy-to-let profitability:
Average buy-to-let fixed rates over a two- or five-year term have risen since the start of March. At 5.40 percent the two-year rate is at its highest level for a year, while the 5.91 percent five-year rate was last seen two years ago.
Borrowing costs for a two-year fixed deal are now £1,100 higher compared to the start of March, based on a £250,000 loan with a 25-year term.
Buy-to-let mortgage choice has fallen by 1,328 deals since the start of March. Lenders offered 5,660 products at the start of the month, which has reduced to 4,332.
Landlords will be preparing for extra costs associated with the Renters' Rights Act, which comes into force from May.
Landlords also expect to invest up to £10,000 per property to reach an Energy Performance Certificate (EPC) C-rating by October 2030. If they don't reach the rating, properties cannot be rented except under some special circumstances.
Springall said: "Soaring borrowing costs will cause pain to landlords this year, as they face higher mortgage repayments. This is terrible news, as rising costs could lead to higher rents for tenants or a drop in the pool of properties available for rent if landlords decide to sell off their portfolios.
"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.
"Positive sentiment in the market 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 from May 2026."
She added that those taking a mortgage now, compared to the start of the month, face higher repayments of £1,100 more a year based on borrowing £250,000 over 25 years at 5.29 percent, versus 4.66 percent at the start of March 2026.
"It is entirely possible that landlords may have to take on an additional loan of up to £10,000 to cover refurbishment costs to raise their EPC ratings," Springall said.
"Tenants must feel safe in their homes, and it will be even more essential to have a dwelling as energy efficient as possible with rising energy costs expected this summer."