• A landlord taking out the average buy-to-let mortgage is earning £4,000 less a year per property compared to 2020 due to high interest rates
• Rents are now at record highs as demand for rental properties continues to outstrip supply, with around 9 applicants for each property
• The total value of buy-to-let lending in 2023 (£18.26 billion) was down 56% from 2022 (£41.36 billion)

9, July, 2024, LONDON –

Yearly returns on a buy-to-let property in the UK were over £4,000 lower on average in April 2024, compared to the same month in 2020, according to new analysis by personal finance comparison site finder.com.

The research highlights that incentives are still lacking for landlords to invest in rental properties, as high mortgage rates – 4.73% for the average 2-year buy-to-let mortgage (75% LTV) in June 2024 – continue.

These findings come amid concerns that landlords are leaving the market, with rental demand massively outstripping supply. The membership body for property agents, Propertymark, saw 9 new applicants for each available rental property in May 2024, while Rightmove reported that the average rent outside of London hit a record high of £1,316 in the same month.

The research by finder.com compared average buy-to-let mortgage rates, house prices and rent prices in the UK to estimate the returns for someone signing up for a new mortgage deal at each point in time.

It found that if a landlord had taken out a 2-year fixed-rate buy-to-let mortgage for the average property worth £230,318 in April 2020, they would have had an average monthly return of £776 from rental income after paying the interest, totalling £9,309 over a year, assuming occupancy every month.

However, if they’d taken out the same mortgage in April 2024 on the average property worth £281,373, they would get 45% 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.

Lending for buy-to-let properties remains low

The value of buy-to-let lending has dropped over the last 2 years, going from £9.7 billion at the end of 2022 to £4.3 billion at the start of 2024. The total value of buy-to-let lending in 2023 (£18.26 billion) was down 56% from 2022 (£41.36 billion).

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% from £9.7 billion to £5.8 billion. This came as buy-to-let mortgage rates leapt up throughout 2022.

After the initial drop, buy-to-let lending has 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.

To see the research in full visit: https://www.finder.com/uk/mortgages/buy-to-let-statistics

Commenting on the findings, Liz Edwards, money expert at finder.com, 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 rental market, leaving renters with fewer options and pushing prices higher and higher.

“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. 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.”

Methodology and sources:

Finder took the average monthly house prices according to the ONS house price index and interest rates on a 2-year fixed rate 75% LTV buy-to-let mortgage according to the Bank of England. The mortgage interest payments were then calculated for an interest-only mortgage. The average UK rent prices were also taken from ONS, and the average interest paid on a mortgage was then subtracted from the average rent received to get the returns.

The figures on buy-to-let lending are from the FCA. Rent inflation figures mentioned are from the ONS.