Why mortgage-free landlords say they are leaving, and why it is not about debt

Almost half (47.6%) of landlords with more than half of their portfolio making a loss after all costs and tax plan to leave the rented sector completely within three years (base 126). Among landlords with no loss-making property, the figure is 19.8% (base 934).

These figures come from our Q3 2026 Landlord Sentiment Survey, which ran from 1 to 8 October 2026. 1,654 landlords took part and 1,472 completed every page. For the full results, including how sentiment has moved since Q1 and Q2, see the main Q3 2026 results article.

This quarter we asked, for the first time, what proportion of each landlord’s portfolio is currently making a loss after all costs and tax. The main article reported that just over a quarter of landlords (26.2%, base 1,485) have at least some loss-making property. Here we look at who those landlords are, how losses relate to borrowing, and what they mean for landlords’ plans. We also look at a finding that, at first sight, points the other way: landlords with no mortgages at all are the most likely to say they will leave.

Heavy losses go hand in hand with leaving

The share of landlords planning to exit completely rises sharply with the share of their portfolio that is losing money. Among landlords with no loss-making property, 19.8% plan a full exit over the next three years (base 934). That is broadly the same for landlords with up to a quarter of their portfolio in loss (19.1%, base 188), rises to 32.9% where a quarter to a half is loss-making (base 73), and reaches 47.6% where more than half or all of it is (base 126). Of those whose entire portfolio is loss-making, 54.2% plan to exit (base 72).

Lighter losses show up in a different way. Landlords with up to a quarter of their portfolio in loss are the most likely to plan to sell some properties but not all (56.9%), which suggests they are trimming loss-making properties rather than leaving. Combining “sell some” and “exit”, 60.3% of landlords with no losses plan to reduce their portfolios, rising to 76.1%, 86.3% and 83.3% across the three loss bands.

Critical Finding: Losses are the clearest dividing line in our data between landlords who are staying and landlords who are going. When we compared landlords of similar age, portfolio size and level of borrowing, those with more than half their portfolio in loss were still about three times as likely to plan a full exit as those with no losses. Borrowing, age and portfolio size do not explain the link away.

Losses rise steeply with borrowing

Of landlords with no mortgages, 12.5% report that at least part of their portfolio is making a loss after all costs and tax (base 503). The share rises with each step up in borrowing: 23.3% of those with average gearing under 30% loan to value (base 202), around 31% between 31% and 60% (bases 234 and 197), 38.8% at 61% to 70% (base 160) and 46.9% at 71% or more (base 128). The share with more than half or all of their portfolio in loss rises from 5.6% of mortgage-free landlords to 17.2% of the most highly geared.

Landlords’ answers to a separate question back this up. Asked which other factors influence their decision to sell (respondents could choose more than one, so totals exceed 100%), 24.1% of mortgage-free landlords chose “rental income no longer covering costs” (base 503). That rises to 56.5% at 61% to 70% loan to value (base 161) and 59.2% at 71% or more (base 125). Among landlords with more than half or all of their portfolio in loss, 74.8% chose it (base 127).

The most highly geared group is not uniformly in retreat, however. Landlords borrowing 71% or more of their portfolio’s value are the most likely of any group to be loss-making, and also the most likely to plan to buy more property (19.3%, base 135, against 7.0% overall). The same was true in Q2 (21.6%, base 190). This group appears to include both stretched landlords and active investors who borrow heavily to grow.

Key Insight: For landlords with mortgages, the cost of borrowing now decides whether many properties make or lose money. Mortgage interest is only partly deductible for landlords who own in their own names because of Section 24, so higher rates hit the bottom line harder than they would for most businesses. Even so, one in eight mortgage-free landlords also report losses, a reminder that repairs, compliance, licensing and tax can push a property into the red without any debt at all.

Mortgage-free landlords are more likely to exit, but not because they are mortgage-free

At first sight, the landlords most likely to leave are those with no debt at all. 30.0% of mortgage-free landlords plan to exit the sector completely over the next three years (base 517), against 21.7% of those with mortgages (base 958). The gap was almost the same in Q2 (33.2%, base 615, against 24.4%, base 1,392), when we asked exactly the same questions.

Three things suggest this is not really about debt.

They are not reducing their portfolios more. Combining “sell some” and “exit completely”, 63.6% of mortgage-free landlords plan to reduce their holdings, against 67.2% of those with mortgages. Mortgage-free landlords are also more likely to plan to stay the same (32.5% against 24.1%). They are split between staying put and getting out entirely; landlords with mortgages are more likely to sell some properties and keep others.

They are smaller and older. The typical (median) mortgage-free landlord owns three properties (base 510), against six for landlords with mortgages (base 948); the averages are 7.0 and 14.3, pulled up by a minority of large portfolios. Nearly two thirds of mortgage-free landlords (64.7%, base 496) are aged 65 or over, against 37.2% of those with mortgages (base 908). For a landlord with one property, “selling one” and “exiting completely” are the same thing, and 22.9% of mortgage-free landlords own one property or none, against 7.2% of those with mortgages.

The gap largely disappears among landlords of the same size. Among landlords with three or fewer properties, 40.0% of the mortgage-free plan to exit (base 265), against 35.9% with mortgages (base 262). With four to ten properties the figures are 18.5% (base 178) and 17.5% (base 388); with 11 or more, 18.2% (base 66) and 14.8% (base 297). None of these differences is large enough to be meaningful at these sample sizes, and the same pattern appeared in Q2.

Key Insight: The “mortgage-free exodus” is really a small-landlord exodus. Landlords with no debt tend to be older, with smaller portfolios, and for many of them leaving the sector means selling one or two properties as they retire. Portfolio size, not the absence of a mortgage, is what goes with planning a full exit: landlords with three or fewer properties are more than twice as likely to plan one as those with four or more, whether or not they borrow.

Two routes out: retirement for the mortgage-free, costs and tax for the borrowers

Landlords planning to exit give different reasons depending on whether they borrow. Among mortgage-free landlords planning to leave, the most cited factors were difficulty removing tenants who do not pay or cause damage (61.6%), their own age, retirement or health (59.6%), the higher income tax rates on rental income due from April 2027 (59.6%) and licensing and council enforcement (58.3%; base 151). Only 21.9% cited Section 24 and 31.8% said rental income no longer covers costs.

Among landlords with mortgages who plan to leave, the April 2027 tax change (74.6%), Section 24 (70.1%) and difficulty removing tenants (68.2%) lead, and more than half (53.2%) say rental income no longer covers costs (base 201). Fewer (40.3%) cite age, retirement or health. Respondents could choose more than one option, so totals exceed 100%.

Key Insight: There are two distinct routes out of the sector. Mortgage-free landlords are mostly stepping back at the end of their landlord careers, pushed by regulation and the hassle of managing tenants as much as by money. Landlords with mortgages are more often being squeezed out by the combination of interest costs, Section 24 and the coming increase in income tax on rental profits. Both groups share the same frustrations about possession and licensing.

Losses, not borrowing, drain confidence

Confidence in the outlook for the private rented sector over the next three years is low across the board: 73.3% of landlords are not confident (base 1,483). But it falls sharply with losses. 67.4% of landlords with no loss-making property are not confident (base 933), rising to 80.9% with up to a quarter in loss (base 188), 89.0% with a quarter to a half (base 73) and 92.9% with more than half or all (base 127). The share who are “not at all confident” doubles, from 35.8% to 72.4%. Not one of the 73 landlords with a quarter to a half of their portfolio in loss described themselves as confident.

Borrowing on its own makes little difference. Between 68.7% and 77.1% of landlords are not confident at every level of gearing, from no mortgages to 71% or more, with no consistent pattern.

Key Insight: It is not debt that saps landlords’ confidence; it is whether their properties are paying their way. A highly geared landlord whose rents cover costs is no more pessimistic than a mortgage-free one. Once properties start losing money, confidence collapses, and the plans to leave follow.

Remortgaging: driven by borrowing, not distress

A third of landlords (33.8%, base 1,614) expect to remortgage at least one property in the next 12 months, broadly unchanged on Q2 (34.2%). Among landlords who have mortgages, though, the share has edged up in each survey this year: 43.8% in Q1 (base 1,442), 48.2% in Q2 (base 1,392) and 50.9% in Q3 (base 959). Each step is small, but the direction has been consistent.

Plans to remortgage rise with borrowing, from 3.4% of mortgage-free landlords (base 504) and 28.8% of those under 30% loan to value (base 208), to 67.3% at 61% to 70% (base 168). Landlords with some loss-making property are more likely to remortgage than those with none (53.2% with up to a quarter in loss, base 188, against 30.0% with no losses, base 924), but that is mainly because they borrow more. Once borrowing is taken into account, the difference disappears. Landlords with more than half their portfolio in loss are, if anything, less likely to be planning a remortgage (36.5%, base 126).

Key Insight: Remortgaging is a routine part of running a geared portfolio rather than a sign of distress. The landlords with the heaviest losses appear more likely to be heading for the exit than refinancing to stay in.

In landlords’ own words

We also asked two open questions: the single biggest issue landlords face, and what would make them stay or expand. Landlords with heavy losses were about twice as likely as those with no losses to raise costs or losses as their biggest issue, and more likely to raise tax. Among mortgage-free landlords planning to exit, around 45% of those who answered said nothing would change their minds, or simply that they are leaving; interest rates and Section 24 barely featured in their answers.

Themes from landlords with heavy losses included:

• Barely breaking even: landlords working full time on their portfolios and still making little or nothing after tax, with less money left to reinvest in the properties.

• Repairs and voids: the cost of putting a property right after a tenancy ends often exceeding the deposit.

• Equity: in some areas, many years of flat prices leaving little equity to fall back on.

• Pensions: smaller landlords who regard their properties as their retirement income feeling penalised by the tax system.

• Treat it as a business: calls for mortgage interest and other costs to be fully deductible, as for other businesses.

Mortgage-free landlords planning to leave more often described the regulatory direction of travel and difficulties with tenants than money. One described being unable to sell a leasehold flat because of ground rent and service charges, and so continuing to let it.

How we analysed the results

• Questions: Q25 (share of portfolio making a loss after all costs and tax, base 1,485), Q14 (average gearing, base 1,539), Q3 (plans for the next three years, base 1,629), Q4 (remortgage in the next 12 months, base 1,614), Q17 (confidence in the sector’s outlook, base 1,534) and Q19 (other factors influencing the decision to sell, multi-select, base 1,486), compared with portfolio size (Q9) and age (Q27).

• Bases: percentages are of landlords who answered both questions in each comparison, so bases vary. Landlords who chose “rather not say” on gearing are excluded from comparisons by gearing.

• Groups: “mortgage-free” means average gearing of “no mortgages”; “with mortgages” means any loan-to-value band. Gearing of 71% to 75% and 76% or more are combined as “71% or more”. “More than half” and “all of it” loss-making are combined as “more than half or all”, except where stated. In the loss charts, landlords who answered “don’t know” or “not applicable” on losses are excluded; in the chart of losses by gearing they are included in the base. Portfolio size is grouped as three or fewer, four to ten and 11 or more.

• Small numbers: no group with fewer than 50 respondents is reported. Differences are described as meaningful only where they pass a standard statistical test at 95% confidence. The links between losses and exit, mortgage status and exit, losses and confidence, and losses and remortgaging were also checked in combined models allowing for age, portfolio size and borrowing.

• Comparisons over time: gearing and remortgage questions are unchanged since Q1, so those trends are like-for-like. Our question about plans covered the next 12 months in Q1 and the next three years from Q2, so comparisons of plans use Q2 and Q3 only. The questions on losses, confidence and reasons to sell are new this quarter.

• Who took part: respondents are self-selecting Property118 readers, not a random sample of all UK landlords. They are mostly experienced landlords aged 55 or over, and every question in Q3 could be skipped.

What Does This Mean for Landlords?

The survey points to two different groups leaving the rented sector, for different reasons.

The first are landlords whose properties no longer pay their way. They are more likely to borrow heavily, more likely to cite Section 24 and the coming increase in income tax on rental profits, and far more likely to have lost confidence in the sector. Losses are the factor most closely linked to a plan to leave, even after allowing for age, portfolio size and borrowing.

The second are smaller, older landlords, often with no debt, who are stepping back as they retire. For them, debt is not the problem; the burden of regulation and managing tenants weighs as heavily as tax. Their departure would not be fixed by lower interest rates.

That distinction matters for anyone trying to keep rental homes in the sector. Measures that improve the economics of letting, whether on interest costs, tax treatment or compliance costs, would speak most directly to the first group. Simpler and more predictable regulation, particularly on possession and licensing, would matter more to the second. Many smaller landlords are likely to leave regardless as they reach retirement.

For individual landlords, the message from the data is that the percentage of a portfolio that is losing money matters more than the level of borrowing in itself. Many highly geared landlords are profitable and still investing. Landlords whose properties are in loss may want to review which properties are dragging the portfolio down before deciding whether to sell some, refinance or leave altogether.

These are the views of engaged Property118 readers rather than every landlord in the UK, and they describe intentions rather than actions. The Q4 survey will show whether the link between losses and exit plans holds as interest rates and tax changes take effect.

Have Your Say

Is your portfolio still paying its way, and has that changed your plans? Please tell us in the comments below; your experiences help explain what the numbers show.

Look out for the Q4 2026 survey at the end of December. The more landlords who take part, the stronger the evidence we can put in front of journalists and policymakers. Read the full Q3 2026 results.