Analysis carried out by Platinum Property Partners (PPP) reveals that the Houses in Multiple Occupation (HMOs) are the most stable and profitable form of buy-to-let (BTL) investment, protecting landlords against higher costs caused by an interest rate rise.  

HMOs – rented to young professionals and key workers – are geared towards maximising rental income by letting each room on an individual basis. Recent research for PPP (Investor returns compared: a guide to recent buy-to-let and HMO returns) has shown that the profits of a standard BTL investment (purchased at the average UK property price of around £183,000) could be wiped out by a 3% rise in interest rates (assuming mortgage rates increase by the same amount) as gross rental income is not sufficient to cope with higher mortgage interest repayments. In this example, a 3% interest rate rise would result in a £347 increase in monthly payments - making the annual mortgage bill over £4,000 more expensive and resulting in a £660 annual loss. 

However, the firm says that a HMO property already has higher monthly mortgage interest payments due to limited product availability, and should rates rise by 3%, a typical HMO would still earn a profit of £2,139 per month, down from £2,565 today.