Buy to let returns plummet for landlords as mortgage rates soar

Buy to let returns plummet for landlords as mortgage rates soar

9:15 AM, 17th August 2023, About 11 months ago 2

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The average yearly returns on a rental property in the UK have fallen by more than £4,000 in June 2023, compared to the same month last year, research reveals.

The data from analysed monthly average buy to let mortgage rates, house prices and rent prices to find how much a landlord would make from renting out a property after paying interest.

The result is that a landlord who took out a two-year fixed rate buy to let mortgage in June 2022 would earn an average of £609 per month from rent, or £7,312 over a year.

However, a landlord who took out the same mortgage in June 2023 would only earn an average of £250 per month, or £2,995 over a year.

That’s a whopping 59% less in monthly returns and a £4,317 drop in yearly income.

Trend of landlords pulling out of the buy-to-let market

Kate Steere, a mortgages expert at, said: “We’re seeing a trend of landlords pulling out of the buy-to-let market as consecutive base rate hikes have made it unprofitable for them to continue.

“This will have a worrying impact on an already competitive rental market, leaving renters with fewer options and rising costs as they attempt to navigate the cost-of-living crisis.”

She added: “Even though we’ve seen house prices start to come down, and 40% of experts from our recent panel believe a housing market crash is on the horizon, any landlords who are coming off a fixed rate now will no doubt be put off by the staggering mortgage rates which are now over 6%, compared to less than 2% two years ago.”

Decline in landlord income

The main reason for this decline in landlord income is the rising cost of borrowing which has pushed up mortgage rates for both residential and BTL borrowers.

The average buy-to-let mortgage rate for June was 5.45%, while the average rate for July reached 6.18%. These are the highest rates since the financial crisis of 2008.

Meanwhile, house prices have not fallen enough to offset the higher interest payments.

The average UK house price in June was £287,546, according to the ONS house price index.

This is only 1.6% lower than the average price in September 2022, when it peaked at £292,344.

BTL property investment is less attractive

The combination of higher mortgage rates and lower house prices has made BTL property investment less attractive.

The latest figures from UK Finance show that the value of BTL mortgage lending in the UK fell by 40% to £5.8 billion in the first quarter of 2023, from £9.7 billion in the previous quarter.

The number of loans granted also fell by 44% compared to the same period last year.

And says this trend could have serious implications for the rental market, as fewer landlords could mean fewer properties available for rent.

That scenario would drive up rent prices and make it harder for tenants to find a home.

Also, the move could affect the overall housing market, as less demand for BTL properties could lead to lower house prices and reduced market activity.

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10:05 AM, 17th August 2023, About 11 months ago

As an example if you're coming off a 3% fix to a new rate of 6.3% in my area the house prices would need to drop by 30% or the rent increase by 38%. Reality is it would be a mixture of both but even then the same profit as before would unlikely be achievable; ROI is dropping big time, so likely most would sell as it's no longer profitable return for the efforts or being a landlord. Put my cash elsewhere for now thank you!


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13:27 PM, 17th August 2023, About 11 months ago

Reply to the comment left by JaSam at 17/08/2023 - 10:05Whether by accident or design we are in a perfect storm for indebted landlords and the result will be a chunk less available homes for rental. There are people building to let but in my experience people do prefer if they can find it more traditional homes than modern rabbit hutches, For those who can hold on, I believe it will be worth it, but it might be a very long wait with some form of rent control re-emerging if the next Government is a left wing Labour one with a clear majority.

With a considerable proportion of tenants housed by private landlords it might suit the Government to reduce the cost where the benefit system picks up the bill by both security of tenure and mandatory rent control. Back to the Rent Acts UGH

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