Landlords are back buying!

After nearly 2 years of diminishing interest from landlords as tax rises, regulation and legislation impacted returns it looks like landlords are now back buying again. In the first three months of the year there were 58,347 new buy-to-let loans advanced in the UK, worth £10.5bn data from UK Finance shows. This is up 38.6% by volume and 46.8% by value, compared with the same quarter a year ago and offers the first glimmer of hope that the infamous landlord sell off is over.

The average gross BTL rental yield in the first quarter of this year was 6.94%, compared with 6.88% 12 months ago. The average interest rate across all new landlord loans was 4.99%, 10 basis points lower than in the previous quarter, and 41bps lower than in the same quarter of 2024. The average BTL interest cover ratio was 202%, up from 190% a year ago and unchanged from the previous quarter, “reflecting the downwards movement in interest rates,” says the banking body.

The number of landlord fixed rate mortgages outstanding in the first three months of the year was 1.44 million, 4.99% up on a year ago. By contrast, the number of variable-rate loans outstanding fell by 15.8% to 500,000. There were 11,830 BTL mortgages in arrears greater than 2.5% of the outstanding balance at the end of this quarter, down by 780 from the previous quarter.

Zoopla executive director Richard Donnell says: “Activity from BTL landlords is starting to increase as mortgage rates stabilise and yields from residential property move higher as rents rise faster than house prices.“The big landlord sell-off is coming to an end after a decade of tax changes and higher borrowing costs that saw many landlords reconsider their strategy and property holdings.

“As base rates start to fall, we are likely to see a continued increase in demand from landlords with a greater focus on strength and quality of cashflow rather than house price inflation.”

In Liverpool city centre we are also seeing a slow and gradual return of the landlord/investment buyer as yields continue to propel higher and flat prices fall due to issues with building safety. Whilst the majority of investor purchases in Liverpool are cash, many investors are buying in the hope that when the relative issues are fixed, and lending becomes “friendlier”, they will be able to refinance their investments thereby generating a strong return on their purchases. In the meantime they are often seeing rental returns in excess of 10%.

Article courtesy of Mortgage Finance Gazette/Roger Baird