In a significant shift for the UK rental market, average rental yields have soared to a 10-year high of 6.3%, with 82% of landlords reporting strong tenant demand. This data comes from the Q2 2024 Landlord Trends report, conducted by Pegasus Insight for Foundation Home Loans.
The comprehensive survey involved 799 online interviews conducted between June and July 2024. The findings reveal that 60% of landlords rely on borrowing to finance their portfolios, with an average of 5.3 loans each. This figure jumps to an average of 14.4 loans for landlords managing more than 11 properties.
A significant portion of landlords—over one-third—plan to remortgage or undertake a product transfer in the coming year. They anticipate refinancing an average of 2.5 products, with 38% having one mortgage to refinance, 34% two, 12% three, 8% four, and 7% more than five mortgages reaching maturity within this period.
On average, landlord borrowers owe £665,000, equating to about £125,000 per buy-to-let mortgage. Borrowing varies widely, from £268,000 for non-portfolio landlords, who have one to three buy-to-let mortgages, to £1.16 million for those with larger portfolios. Notably, one in five landlords owe more than £1 million.
The report highlighted a growing trend towards limited company ownership among landlords, particularly for new purchases, with 67% of new acquisitions now being made through company structures.
Among the 10% of landlords planning to expand their portfolios over the next year, 67% intend to use a buy-to-let mortgage, 29% plan to buy outright, 31% will release equity from existing properties, 10% will seek commercial loans, and 5% will use funds from a pension pot.
In the past four years, the incidence of rental increases has tripled, with 74% of landlords raising rents in Q2 2024. This trend is largely attributed to rising costs in portfolio management and increased mortgage finance expenses.
The Landlord Trends report also explored critical issues within the private rental sector, notably the potential impact of rent controls. Legislative changes, including the proposed removal of Section 21 (no-fault evictions), remain a significant concern for landlords. Over half of those surveyed, 55%, indicated that rent controls would substantially affect their commitment to the rental market, and one-third might consider selling their properties if such controls were introduced.
Interestingly, landlords appear less concerned about other regulatory changes, such as outlawing bans on specific tenant types, compulsory licensing, or replacing fixed-term contracts with rolling agreements.
Grant Hendry, director of sales at Foundation Home Loans, stated, “Despite a challenging market environment, landlords are finding ways to maintain profitability and expand their portfolios.”
These findings underscore a resilient yet evolving landscape for landlords, as they navigate increasing demands and regulatory shifts in the UK rental market.