Landlord Advice: How to Increase Rent in Private Letting

Current BTL Mortgage Rates

With current mortgage rates, the average deal for a fixed-rate buy-to-let mortgage was 6.35% at the start of October. The BoE has been dramatically raising the base rate to combat inflation, to bring it down to 2%. Since December 2021, the base rate has increased 14 times. This alone has brought concerns to investors and the market overall.

Since the summer’s sudden base rate rise, BTL property investors and landlords have been paying 40% more in interest than they were in August 2022. According to Hamptons, this equates to an extra £4.3 billion over the last 12 months and a total of £15 billion in annual interest between all investors. For this reason, some landlords may want guidance on property investment or the current market.

With rising rates, prices, and concerns, landlords will want to increase the rent on their BTL properties to both meet the rental market average and ensure profitable returns. Though, especially with the Renters’ Reform Bill and the Section 13 notice looming, what is the best practice for a landlord to increase rent?

Increasing Rent

Due to a low housing supply and high mortgage rates, rental prices are rising. Spring saw a new record in the market as rental prices reached a 5.5% YoY growth. A 5-year forecast on rental prices even suggests a 22% increase by 2027.

August of this year saw a 10% YoY rise in the average monthly rent in the UK, sitting at £1,061. As for annual rent, September experienced an increase of £1,080 from the year before to reach an average of £12,732. Including London in this figure brings the average to £15,312.

Section 13 Notice

Once the Renters’ Reform Bill is implemented, it will become a legal requirement for landlords to submit a Section 13 notice whenever they want to increase their tenants’ rent – instead of just when tenants contest. The limit of once every 12 months will still apply.

The Bill bans no-fault evictions and doubles the current notice period for rent increases. Section 21, where a landlord can evict a tenant for any reason with at least 2 months’ notice, will also be abolished. With approximately 300 tenants in London facing homelessness a week, the Renters’ Reform Bill will help tenants benefit from “safer, fairer, and higher quality homes” and can fine landlords for errors.

This modernisation of the UK’s renting system also makes it easier for landlords to evict tenants for the likes of anti-social behaviour or repeatedly missed payments. Eventually, the Renters’ Reform Bill will create a better standard of homes and increased rights for families with dependent children or benefits.

The Renters’ Reform Bill was announced in May of this year and has its second reading this week (October 2023). If continued at this pace, the bill will likely be introduced in 2024.