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How does the Bank of England base rate affect me as a landlord?

by Narinder Gill on 9th March 2023

As a landlord, an increase in the Bank of England base rate can affect you in several ways. Here are some of the potential impacts:

Mortgage payments

Inflation has a significant impact on mortgages. If you have a mortgage on your rental property, an increase in the base rate will likely lead to an increase in your mortgage payments. This means that your monthly expenses will increase, impacting your cash flow and profitability. In addition, this may lead you to increase your prices for your tenants.

The Bank of England keeps a close eye on inflation and uses it to establish interest rates. The Bank of England aims to keep inflation at 2%, however this is a delicate balancing act. If they expect inflation to rise above 2% soon, they may increase interest rates to subdue it and discourage businesses from increasing prices any more than they have to. Or, if they expect inflation to drop below 2%, they might reduce interest rates to make borrowing cheaper, enabling consumers and businesses to spend more, which can invigorate an economy. For this reason, inflation critically affects the price you pay for a mortgage. If interest rates go up to counter inflation, anyone looking to get a new mortgage will have to pay more interest than they would have if they had applied before the interest hike. Alternatively, if you are currently on a tracker mortgage, you can expect your monthly payments to go up the month after the Bank Of England increases the base rate. Rising mortgage rates aren’t the only thing you need to keep an eye on; the rise in interest rates can also affect repayments on other loans, such as credit cards and car loans, so be sure to consider these and budget correctly.


Higher interest rates can make it more difficult for tenants to secure mortgages to buy their own homes, which could increase demand for rental properties. We have seen, particularly in the South East and London, rental values significantly increase over the last 18 months. On the other hand, if the rate increase leads to an economic slowdown or recession, tenants may struggle to pay rent which may result in delayed payments or, worst case, no payments. Tenants may also try to find cheaper rental options, so if your rental price is high, tenants may not be willing to choose your rental property.

Property values

Rising interest rates can lead to a slowdown in the property market, which may cause property values to drop. This could impact the value of your rental property, which could affect your ability to refinance or sell the property in the future.

Cash flow

An increase in mortgage payments and potential drops in rental income or property values could impact your cash flow as a landlord. Therefore, it’s essential to have a buffer or contingency plan in place to cover unexpected expenses or dips in profitability


The Bank of England base rate can impact inflation, which can, in turn, affect landlords. If the base rate increases, it may lead to higher inflation, increasing the cost of living. This can impact landlords’ expenses, such as maintenance and repairs, and may require them to increase rent prices to cover the additional costs. This may also increase the expenses of their tenants, who will be spending more on things like food, fuel and other personal expenses. This may also lead them to struggle to pay their monthly rent, especially if the landlord has increased it

Economic conditions

Changes in the base rate can also affect the overall economic conditions in the country, which can impact landlords. For example, if the base rate decreases, it can stimulate economic growth, leading to increased employment rates and potentially increased demand for rental properties.

What course of action is advisable for landlords?

With an anticipated continuation of increasing interest rates, securing a fixed interest rate buy-to-let mortgage is recommended, providing a predictable bottom-line cost. In this current climate, it is essential to search for the best mortgage product available and best suited to your requirements. Consider seeking advice from buy-to-let mortgage specialists, such as ourselves, who can provide tailored recommendations for various mortgages. By doing so, it is possible to save both time and money. Additionally, ensure your letting agent actively searches for high-quality tenants and strives for the best possible return. If your letting agent has yet to review rental prices, seeking advice from another professional lettings and management agency may be beneficial.

Although it may not be possible to avoid increasing costs, there are practical measures that can be taken to manage them. First, ensure that your lettings and management agency conducts frequent property checks to prevent minor problems from developing into costly issues. Developing good relationships with your tenants can help you avoid rent arrears or unpaid bills, fostering two-way communication. Finally, given the price fluctuations, obtaining multiple quotes for any necessary work is essential, allowing you to compare prices and make informed decisions.

How the Bank of England sets interest rates

In the United Kingdom, the Bank of England determines the interest rate and is responsible for setting it. This rate is the amount at which banks can borrow money from the central bank, significantly impacting the cost of borrowing for individuals and businesses.

To set the interest rate, the Bank of England’s Monetary Policy Committee (MPC) meets eight times annually to review the economic situation and assess whether the current rate is appropriate for the current economic climate. During these meetings, the committee evaluates several economic indicators, such as inflation, employment data, and GDP growth, to analyse the state of the economy. Based on this information, the MPC decides whether to increase, decrease or maintain the current interest rate.

If the MPC decides to raise the interest rate, it aims to decrease inflation by increasing the cost of borrowing, thereby reducing consumer spending and investment. Conversely, if the committee decides to lower the interest rate, it aims to stimulate borrowing and spending to promote economic growth. Once the decision is made, the Bank of England implements it by adjusting the interest rate charged to banks for borrowing money. The banks then modify their interest rates for loans and savings accounts, affecting the cost of borrowing and saving for consumers and businesses.
Ultimately, the Bank of England’s interest rate decisions are based on a thorough analysis of economic conditions to promote sustainable economic growth and stability.

Overall, the impact of a Bank of England base rate increase on landlords will depend on a range of factors, including the specific circumstances of the property and the wider economic conditions at the time. So staying informed and prepared for potential changes that could impact your rental business is essential.


Written by Narinder Gill

Associate Specialist Broker

Narinder is an Associate within the Commercial Team at Coreco Specialist Finance. He assists HNW and UHNW clients with their large portfolio and complex lending requirements. He specialises in complex/portfolio Buy to Let mortgages (including Ltd Co/SPV), HMO’s and Bridging finance. Narinder also advises on all Commercial, Semi-Commercial, and Development finance. The ‘go to’ Broker for the more technically challenged lending requirements, frequently providing bespoke/structured lending solutions. After graduating from the University of Kent with a LLB (Hons) in Law and College of Law (LPC) Narinder joined The Law Society & Royal Courts of Justice in London. After working in the legal sector Narinder pursued a career as a Mortgage Broker and quickly became CeMAP qualified. Prior to joining Coreco Specialist Finance, Narinder was a Senior Broker at Mortgages for Business and Countrywide Mortgage services where he assisted in Residential, Specialist BTL & Commercial Finance. Narinder is a member of the London Institute of Banking & Finance. Outside of work, Narinder is an avid golfer having captained his University and Club Scratch team and competes in County tournaments.

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