While homeowners cheer the drop in mortgage rates to 3.75%, the UK’s millions of private renters are asking: “What about us?” Theoretically, lower borrowing costs for landlords should stop rents from spiraling. However, the dynamics of the housing market suggest that renters might not see any benefit in 2026.
Landlords have faced a double whammy of high mortgage rates and increased regulation/taxes. Many have exited the market, reducing the supply of rental homes. A 0.25% rate cut helps those who remain, but it likely isn’t enough to induce them to lower rents, especially when tenant demand is at record highs. The supply shortage is the primary driver of rent, not just the interest rate.
Furthermore, the Bank’s agents reported that wage growth is still 3.5%. Landlords know that tenants have slightly more money and will price their properties accordingly. This “sticky” inflation in the service sector (and rent is a service) was exactly what the MPC hawks warned about.
The “fragile economy” also hurts renters disproportionately. They are more likely to be in insecure work, making the 0.1% GDP contraction a direct threat to their livelihood. If the rate cut fails to stop the recession, renters will face the twin perils of high rent and job insecurity.
Unless the rate cut sparks a massive wave of new buy-to-let investment (unlikely given the “closer call” warnings), the rental crisis will continue. The transmission mechanism from the Bank of England to the tenant is broken, blocked by a lack of housing supply.
