The annual returns for landlords with buy-to-let (BTL) mortgages on average UK properties plummeted by over £4,000 in April 2024, marking a 45% decrease from 2020, as revealed by an analysis from personal finance website Finder.

According to Finder, the motivation for landlords to invest in rental properties has significantly waned due to persistently high mortgage rates. The average 2-year BTL mortgage at 75% loan-to-value (LTV) stood at 4.73% in June 2024.

The property market is showing signs of strain, with the membership body for property agents, Propertymark, reporting nine new applicants for each available rental property in May 2024. Concurrently, Rightmove indicated that average rents outside London surged to a record high of £1,316 per month.

Finder’s research involved a comparative analysis of average BTL mortgage rates, house prices, and rental prices, estimating the returns for landlords securing new mortgage deals at different points in time.

The findings showed that a landlord taking out a 2-year fixed-rate mortgage (75% LTV) on an average property valued at £230,318 in April 2020 would have enjoyed an annual return of £9,309 after paying interest. However, for the same mortgage on an average property worth £281,373 in April 2024, the yearly return dropped to £5,087, a reduction of £4,221.

BTL lending has experienced a notable decline, with the total value dropping from £9.7 billion in the last quarter of 2022 to £4.3 billion in the first quarter of 2024. The annual total for 2023 stood at £18.26 billion, a 56% decrease from the £41.36 billion recorded in 2022. Additionally, between the last quarter of 2022 and the first quarter of 2023, BTL mortgage lending fell by 40%, from £9.7 billion to £5.8 billion. The downward trend continued into 2024, with a 25% reduction in loan values in the first quarter compared to the same period in 2023.

Liz Edwards, a money expert at Finder, commented on the situation: “The buy-to-let market has been stagnating over the past couple of years as rising interest rates have made it less profitable for landlords. Record high UK rent inflation of 9.2% was seen in March this year and, while this is slowly beginning to ease, it remains worryingly high.”