Buy-to-let (BTL) landlords anticipate an 80% rise in the cost of borrowing, but 53% still plan to expand their portfolios, according to a report published by the Intermediary Mortgage Lenders Association (IMLA).
The typical landlord was found to have a median annual rental income of £14,000 and median annual profit of less than £9,000, with an average expected increase in interest payments of £7,700 by 2025.
Landlords were found to have a median non-rental income, including those in London, of £39,000, compared with median private rented sector (PRS) tenant income pf £37,000 nationally and £50,000 in London.
The majority (80%) of landlords owned one or two properties, equivalent to 61% of PRS stock, while 13% were classed as portfolio landlords, with four or more, accounting for 39% of PRS stock.
Only 10% of all rented property was held in limited companies, and just 3% was owned by institutional investors.
Almost three-fifths (36%) of respondents believed they were paying more tax as a result of the removal of the mortgage interest deduction, but IMLA calculated that 58% were paying more.
Meanwhile, 64% of respondents said increased regulation had raised their costs, rising to 73% among portfolio landlords.
When asked what impact a mandatory rent freeze would have on their rental business, 7% said they would be forced to sell property or exit the market.
Only 21% of mortgaged landlords planned to sell property in the next five years.
Kate Davies, executive director of IMLA, 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.
“Our research shows that many 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.
“There are tough times ahead for all parties in the PRS, and it is in everyone’s interest to understand the pressures involved.
“Landlords’ tenacity is to be commended – it is a great relief that so many plan to stay in the sector and increase supply when they can.
“Policymakers should beware adopting any policies which could upset what is already a delicate balance, and ensure they do nothing further to deter the small businesses which form the backbone of the PRS from continuing to invest.”
