Average landlord returns have fallen by 45 per cent in April 2024 when compared to the same month in 2020, research from Finder has revealed.
The research found that yearly returns for a landlord taking out a buy-to-let mortgage on the average UK property were over £4,000 lower in April of this year compared to the same month four years ago.
Finder suggested this highlights a lack of incentives for landlords to invest in rental properties, as high mortgage rates, such as 4.73 per cent for the average two-year buy-to-let mortgage in June 2024, continue.
Finder money expert, Liz Edwards, 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.
“We are now seeing the worrying effects this is having on an already competitive market, leaving renters with fewer options and pushing prices higher and higher.
“Record high UK rent inflation of 9.2 per cent was seen in March this year and, while this is slowly beginning to ease, it remains worryingly high.
“This new government needs to tackle the rental crisis head-on as rents continue to climb and the number of available rental properties remains well below what is needed to meet demand.”
The research foubd, if a landlord had taken out a two-year fixed-rate buy-to-let mortgage (75 per cent LTV) for the average property worth £230,318 in April 2020, they would have had an average monthly return of £776 from rental income.
This would total £9,309 over a year, assuming occupancy every month.
However, if they had taken out the same mortgage in April 2024 on the average property worth £281,373, they would get 45 per cent less in average monthly returns at just £424.
This totals £5,087 over a year, a dramatic drop of £4,221 in rental income per property.
These findings come amid concerns that landlords are leaving the market, with rental demand “massively” outstripping supply.
Lending
Finder also reported the value of buy-to-let lending has dropped over the past two years, from £9.7bn in the last quarter of 2022 to £4.3bn in the first quarter of 2024.
Meanwhile, the total value of buy-to-let lending in 2023 (£18.26bn) was down 56 per cent from 2022 (£41.36bn).
Additionally, between the last quarter of 2022 and the first quarter of 2023, the value of buy-to-let mortgage lending saw a “significant” drop of 40 per cent from £9.7bn to £5.8bn.
After the initial drop, buy-to-let lending remained low, with the value of loans granted down by 25 per cent in the first three months of 2024 compared to the first three months of 2023.
tom.dunstan@ft.com
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