Landlords have benefited from rental yields that have reached a 10-year high of 6.3%, although concerns remain about rent control, according to data released by Foundation Home Loans
Their Q2 2024 Landlord Trends report revealed that 60% of landlords have borrowed to fund their properties, holding an average of 5.3 loans, which has increased to 14.4 loans for those holding more than 11 properties in their portfolio.
Over a third planned to undertake a product transfer or remortgage in the next 12 months, with landlords predicting they will refinance an average of 2.5 products. This breaks down to 38% having one mortgage to refinance, 34% have two, 12% three, 8% four and 7% have more than five mortgages due for maturity.
On average, landlord borrowers owed £665,000 in total, equivalent to about £125,000 per buy-to-let mortgage.
Total borrowing ranged between £268,000 for non-portfolio landlords – those with one to three buy-to-let mortgages – and £1.16m for portfolio landlords.
Rent controls and legislative changes, such as the removal of Section 21 (no fault evictions), were high on the agenda for landlords.
55% said rent controls would greatly impact their commitment to renting, and one in three would consider selling their properties if controls were introduced.
Grant Hendry, director of sales at Foundation Home Loans, said: “Despite a challenging market environment, landlords are finding ways to maintain profitability and expand their portfolios.
“Average rental yields increasing, the ongoing preference for limited company ownership and high tenant demand are all encouraging trends which keep on emerging and should provide mortgage advisers with opportunity to secure business and help landlords navigate the market.
“There is clearly a significant remortgage market to target in the months and weeks ahead, with a number of the landlords surveyed outlining how they had multiple mortgages coming to an end which will need refinancing.”
He added: “In an interest rate environment which has seen some falls already, we believe the opportunity to remortgage is now greater than in the last couple of years, and we’ll see a growing cohort of landlord borrowers able to remortgage to a different lender rather than simply have to accept a product transfer.
“Again, this presents a strong opportunity as it doesn’t just bring the remortgage into ‘play’ but clearly the opportunity to talk to existing landlord borrowers about any other product/service wants and needs they might have.
“The cost of financing properties and portfolios, even with higher yield and strong tenant demand, continues to sit heavily with landlords and is impacting their views on whether now is the time to add to portfolios.
“It is to be hoped the new Government is committed to increasing supply in the PRS, as it certainly requires more housing in order to meet the tenant demand that is so clearly there.”
Hendry concluded: “As the market evolves, we would urge advisers to stay informed about regulatory changes such as potential rent controls and the removal of Section 21.
“By providing expert advice and comprehensive mortgage solutions, advisers can help landlords navigate these challenges and capitalise on opportunities, ensuring the continued growth and profitability of their portfolios.”
