Landlords don’t tend to get much sympathy from the general public as they are seen as part of the institution that makes money from a basic thing like housing and they tend to have a perception of being extremely wealthy people. The reality however is that many people do it as their full time job and will often have large amounts of borrowing and repayments to make with quite small margins in terms of what they can afford to lose out on. There are landlords who own property through family businesses or family money and they won’t be affected by many of these situations but a large chunk will be. We’ll have a look into what the main challenges are likely to be this year.

What is different about 2023 for landlords?

The single, major factor that will affect the vast majority of landlords is the big increase in interest rates. For those who have long term fixed borrowing it won’t be as bad but for anyone on either a flexible rate or a fixed rate that is ending anytime soon, there will be a lot of issues. As anyone with a mortgage will know, the increase in interest rates adds on hundreds of pounds per month to your repayments so if you times that by 3 or 4 for additional properties then the problem is compounded.

A monthly rental yield of around 5% has long been considered good for landlords, this means after your repayments have been made and your tenant has paid their rent that you should have 5% left over. If you then have interest rates that have gone up 3% that leaves you with only 2%. That 2% then has to pay for anything that goes wrong with any of a landlord’s properties from boiler problems to new furniture and those margins are quite fine.

To compound the issues the cost of living crisis is meaning that tenants are also becoming less reliable, moving out sooner than expected of failing to pay on time which has a knock on effect to the landlord. More and more landlord solicitors are having to be instructed to commence legal action on tenants than before.

How long is the current climate predicted to last?

Best estimates at the moment are that both inflation and interest rates have now peaked and should start to come down in the next 6 to 12 months. It is expected that by the end of 2023 interest rates will have gone down by at least 1% which is good news for landlords everywhere. One potential issue however is that the energy price cap is still much higher than it was in 2022 and the government support is due to end in April 2023 which means that more tenants may have difficulty making ends meet. It could mean that landlord legal advice is needed more than ever for the next 12 months or so in order to get money back from tenants who owe considerable sums of money.