The Bank of England published Staff Working Paper No. 1,176 analysing how pricing and underwriting in the United Kingdom’s buy-to-let mortgage market responded to a large, unanticipated rise in interest rates. Using administrative data covering the universe of mortgage originations to individual real estate investors, the authors find that originations became more concentrated among specialist lenders, which passed through smaller rate increases to larger borrowers while increasing loan fees, helping borrowers meet interest-coverage ratio tests and supporting credit availability. The study exploits the market reaction to the UK Chancellor’s 23 September 2022 mini-budget, when the two-year swap rate rose from 4.44% to 5.56%, and compares outcomes across lender types (specialist versus non-specialist based on pre-shock buy-to-let exposure) and borrower size. It estimates that, pre-shock, specialist lenders charged portfolio landlords higher prices than non-specialists, averaging 53.7 basis points more on interest rates and 17.7 basis points more on fees; post-shock, specialists increased rates 21.6 basis points less but raised fees 43.6 basis points more, implying a lower effective annual cost on a five-year fixed-rate benchmark. Evidence from daily data on loans on offer shows similar changes in product design, consistent with specialist lenders targeting borrower types and reinforcing market segmentation. The Bank notes that staff working papers present research in progress to elicit comments and do not represent Bank of England policy.
Bank of England 2026-03-20
Bank of England staff paper finds specialist buy-to-let lenders raised fees to limit rate pass-through after the 2022 UK interest-rate shock
The Bank of England's Staff Working Paper No. 1,176 examines the UK buy-to-let mortgage market's response to a significant interest rate rise, revealing that specialist lenders concentrated originations and adjusted pricing strategies to support credit availability. Specialists passed smaller rate increases to larger borrowers while raising fees, resulting in a lower effective annual cost. The findings underscore market segmentation and the strategic targeting of borrower types by specialist lenders.