Yearly returns for a landlord taking out a buy-to-let (BTL) mortgage on the average UK property were over £4,000 lower in April 2024 – a 45% drop – compared to 2020, according to analysis by personal finance site Finder.
Finder said landlords were lacking the incentive to invest in rental properties, as high mortgage rates continued – 4.73% for the average 2-year BTL mortgage at 75% LTV in June 2024.
The membership body for property agents, Propertymark, saw nine new applicants for each available rental property in May 2024, while Rightmove reported that the average rent outside of London hit a high of £1,316 in the same month.
The research by Finder compared average BTL mortgage rates, house prices and rent prices to estimate the returns for someone signing up for a new mortgage deal at each point in time.
It found that if a landlord took out a 2-year fixed-rate mortgage (75% LTV) for the average property worth £230,318 in April 2020, they would have had an average yearly return of £9,309 a year after paying the interest.
However, if they took out the same mortgage in April 2024 on the average property worth £281,373, they would get £5,087 over a year, a drop of £4,221 in income per property.
The value of BTL lending dropped over the past two years, going from £9.7bn in the last quarter of 2022 to £4.3bn in the first quarter of 2024.
The total value of buy-to-let lending in 2023 (£18.26bn) was down 56% from 2022 (£41.36bn).
Between the last quarter of 2022 and the first quarter of 2023, the value of BTL mortgage lending saw a drop of 40% from £9.7bn to £5.8bn.
BTL lending remained low, with the value of loans granted down by 25% in the first 3 months of 2024 compared to the first 3 months of 2023.
Liz Edwards, money expert at Finder, said: “The buy-to-let market has been stagnating over the past couple of years as rising interest rates have made it less profitable for landlords.
“Record high UK rent inflation of 9.2% was seen in March this year and, while this is slowly beginning to ease, it remains worryingly high.”
