The Intermediary Mortgage Lenders Association (IMLA) has released a report that uncovers the financial challenges facing landlords in the Private Rented Sector (PRS).
The report counters the stereotype of landlords as wealthy investors, revealing many as small-scale businesspeople.
These landlords are now facing a significant challenge, with an anticipated 80% increase in borrowing costs as they refinance from historically low fixed rates.
The IMLA Landlord Survey highlighted that the median annual rental income for landlords stands at £14,000, and their profits are generally less than £9,000.
By 2025, there is an expectation of a substantial increase in annual interest payments, averaging around £7,700.
The report also found that the average non-rental income of landlords is roughly equivalent to that of their tenants, except in London where tenants generally have higher earnings.
Kate Davies, executive director of IMLA, addressed the findings, said: “The PRS plays a vital role in the UK’s housing landscape, providing homes to 20% of households.
“While a great deal of attention is, quite rightly, paid to the difficulties faced by tenants, there has been surprisingly little understanding of landlord finances and the strains on these, until now.”
Davies further added: “Our research shows that most landlords are small businesses with modest financial turnover and trading profits, facing rapidly rising costs.
“Sadly, reality dictates that many mortgaged landlords will have no choice but to increase rents in order to keep their businesses viable, while debt-free landlords may well do the same in order to make an adequate return, even if that is lower than current returns available elsewhere.”
Despite the looming financial pressures, the report reveals a positive aspect: a majority of landlords are committed to the sector.
Over half of the mortgaged landlords are planning to expand their property portfolios in the next five years, indicating their dedication to meeting the rising tenant demand.
