Landlords are being warned by the Bank of England Financial Stability Report they will be facing a huge squeeze on their finances of an average £275 extra monthly payment tacked onto their mortgages by the end of 2025.

The latest BofE’s Financial Stability Report warns landlords will have to contend with higher interest rates and more chaotic tax and regulatory changes.

ICR is the interest coverage ratio which is a measure of rental income to interest payments and how the incomings funds the borrowing.

The Bank says: “A landlord with high debt-servicing costs relative to their rental income (ie a low ICR) is more likely to experience repayment difficulties.

“As with owner occupier mortgages, higher interest rates mean an increase in mortgage servicing costs when fixed rate deals need to be refinanced, and most buy-to-let mortgages are interest only, which increases the relative impact of higher rates.

“The average increase in monthly repayments on buy-to-let mortgages by the end of 2025 is projected to be around £275.

“If landlords were to entirely absorb higher mortgage costs (ie without passing any of them on to renters), the share of buy-to-let mortgages with ICRs below 125% would increase significantly from around 3% at the end of 2022 to just over 40% by the end of 2025.”

A spokesman for a trade body, says: “Growing mortgage costs are putting responsible landlords in an impossible position.

“Either they leave the market at a time when demand for rented housing is already outstripping supply, increase rents, or soak up growing costs which many simply cannot afford.

 “Whilst help has been provided for homeowners in the form of the Government’s Mortgage Charter, nothing has been done to support the private rented sector.

“It is vital that ministers step in to protect the market from the impact of growing costs.

“For renters, housing benefit rates need to be unfrozen without delay to ensure they can cover their rent payments.

“Alongside this, tax hikes on the sector need to be scrapped to boost the supply of homes to rent that tenants desperately need.”

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