The rate assumption costing landlords money

You're waiting for interest rates to return to 2020 levels before buying more properties or remortgaging existing ones, assuming current rates are temporary aberrations that will revert to historic lows soon. Meanwhile, landlords who accepted that rates have normalised at higher levels are structuring portfolios accordingly, achieving strong returns at current rates, and positioning themselves advantageously whilst competitors sit out waiting for conditions that aren't coming back.

Here's what separates landlords building profitable portfolios from those waiting indefinitely: understanding that 2026 rates aren't crisis-level peaks requiring patience but the new normal requiring adaptation, and the strategies that work at current rates differ fundamentally from those that relied on ultra-cheap borrowing.

Current rates are normal, not temporary peaks

Interest rates around five to six per cent aren't historically unusual but rather the typical range property investors operated in for decades before the 2008 financial crisis created the abnormal ultra-low rate period many landlords mistakenly consider normal. The expectation that rates will drop significantly below current levels ignores that central banks view current rates as appropriate for controlling inflation whilst maintaining economic stability.

Landlords structuring decisions around assumptions that rates will return to two per cent are planning for scenarios that require economic conditions nobody's predicting. Even optimistic forecasts suggest modest rate reductions, not the dramatic drops that would restore the borrowing costs that made marginal investments viable during the ultra-low rate era.

Properties that only generate adequate returns at two per cent mortgage rates were never sound investments but gambles on permanently cheap borrowing that's now exposed as unsustainable. The landlords succeeding in 2026 own properties that work economically at current rates rather than depending on financing costs that no longer exist.

Fixed rates offer certainty worth paying for

Five-year fixed rates slightly above variable rates currently available provide certainty that protects against further increases whilst allowing confident long-term planning. Landlords gambling on variables hoping for rate drops are exposing themselves to risk that saves minimal amounts if rates fall slightly but costs significantly if they rise instead.

The premium for fixing rates is effectively insurance against uncertainty, and landlords with fixed-rate certainty can plan confidently knowing their financing costs for the next five years regardless of economic volatility. Properties generating adequate returns at fixed rates you've secured work regardless of what happens to rates subsequently, whilst those dependent on variables hoping for drops face uncertainty that complicates all planning.

Yield requirements increased permanently

Properties generating six per cent gross yields worked adequately when mortgage rates were two per cent, but those same properties fail economically when borrowing costs are five per cent. This fundamental mathematics means the properties that worked at historic low rates no longer generate adequate returns, and waiting for rates to drop doesn't change that these properties were only viable during abnormal conditions.

Landlords succeeding in 2026 target properties generating yields that work at current rates rather than hoping financing costs drop enough to make marginal properties viable again. This might mean different locations, property types, or investment strategies than what worked during ultra-low rate periods, but profitable landlording requires adapting to current economics rather than waiting for previous conditions to return.

Remortgaging strategies changed fundamentally

Landlords whose fixed rates are expiring in 2026 face significantly higher refinancing costs than their current deals, creating the choice between accepting higher rates or exiting the market entirely. Those exiting create opportunities for landlords who structured portfolios to work at current rates, as reduced landlord competition supports rental demand whilst property prices reflect current financing realities.

Remortgaging decisions now require calculating whether properties generate adequate returns at current rates rather than assuming refinancing is automatic. Some properties that worked historically won't justify keeping at current financing costs, and the landlords thriving in 2026 are making hard decisions about which properties to keep versus which to sell rather than assuming all properties remain viable regardless of rate changes.

Cash buyers gained enormous advantages

Landlords buying properties with cash avoid financing costs entirely, generating returns from rental yields alone without mortgage payments reducing profitability. The gap between returns cash buyers achieve versus leveraged investors widened dramatically as rates increased, creating advantages for those with capital or those who sell marginal properties to buy fewer properties outright.

This doesn't mean leveraged investing is dead but does mean the calculations changed fundamentally. Properties must generate returns justifying borrowing costs that are substantially higher than the ultra-low rate period that made almost any leverage profitable.

Your interest rate strategy

Accept that current rates represent normal rather than temporary crisis requiring patience. Structure portfolios around properties that work economically at current rates rather than depending on rate drops to restore viability. Fix rates securing certainty even if variables are slightly cheaper currently. Consider whether cash purchases or reduced leverage generates better risk-adjusted returns than maximum borrowing strategies. Make hard decisions about properties that no longer generate adequate returns at current financing costs.

Get expert advice to restructure your portfolio for current rate reality