If you’re looking to invest in property with the view of renting it out, a buy-to-let mortgage is a great way of borrowing the necessary funds to do so. We looked at the latest reports to see how many Brits are investing in property using this lending method.
As of 2023, there are 4.6 million privately rented households in the UK – which is around 1 in every 5 households (19%). This has increased slightly from a decade ago – there were 4 million privately rented households in the UK (18%).
As of June 2024, the average buy-to-let mortgage rate on a 2-year fixed-rate mortgage (75% LTV) was 4.73%. This is down from a decade-high rate of 6.22% in July 2023, but up from an average rate of 4.66% last month and significantly higher than the rate of 2.85% seen 2 years previously in June 2022.
The lowest average buy-to-let interest rate in the past decade was seen in October 2021 at just 1.65%.
| Month | Average buy-to-let mortgage rate |
|---|---|
| Jun 2024 | 4.73% |
| May 2024 | 4.66% |
| Apr 2024 | 4.72% |
| Mar 2024 | 4.83% |
| Feb 2024 | 4.69% |
| Jan 2024 | 5.07% |
| Dec 2023 | 5.40% |
| Nov 2023 | 5.57% |
| Oct 2023 | 5.80% |
| Sep 2023 | 5.99% |
| Aug 2023 | 6.14% |
| Jul 2023 | 6.22% |
| Jun 2023 | 5.48% |
As of April 2024, a landlord could expect to make £424 a month on the average UK property, before tax and any other running costs. Over a year, this works out at £5,087.
However, it’s worth noting that there are likely other fees involved, such as service charges, maintenance costs, insurance, letting fees and any tax you need to pay on your income. These fees will also need to be deducted from a landlord’s overall income.
As of April 2024, the average yearly return on a buy-to-let property is £5,087, down from £9,309 in April 2020. This refers to the amount remaining once mortgage interest payments have been deducted from rental income.
This decrease is due to high mortgage rates in recent months. When buy-to-let mortgage rates increase, anyone looking to take out a new loan will have much higher monthly interest payments. This puts pressure on rental prices, which are already rising. We compared how buy-to-let returns have changed over time in line with changing house prices, mortgage rates and rent prices.
In April 2024, landlords would have paid approximately £830 in buy-to-let mortgage interest. An average monthly rental price of £1,254 leaves them with returns of £424, adding up to £5,087 over the year.
This is a substantial decrease in returns from April 2020, when just £256 in interest was paid, and there was an average rental price of £1,032, giving returns of £776. This adds up to £9,309 over the year.
These estimates show the owner of the average buy-to-let property could earn £4,222 less a year if a 2-year loan was fixed in April 2024 compared to April 2020.
| Period | Interest rate | Average monthly returns |
|---|---|---|
| April 2024 | 4.72% | £423.95 |
| April 2023 | 4.76% | £323.20 |
| April 2022 | 2.43% | £664.14 |
| April 2021 | 2.01% | £730.73 |
| April 2020 | 1.78% | £775.77 |
| April 2019 | 2.29% | £683.60 |
The total value of buy-to-let lending in 2023 was £18.26 billion, down 56% from £41.36 billion in 2022. The value of buy-to-let lending has dropped over the last 2 years, going from £9.7 billion in the last quarter of 2022 to £4.3 billion in the first quarter of 2024.
Buy-to-let mortgage lending made up 8.3% of total mortgage values in the first quarter of 2024, compared to 9.8% in the first quarter of 2023 and 13.4% in the first quarter of 2022.
| Month | Value of lending |
|---|---|
| Q1 2022 | £10.3 billion |
| Q2 2022 | £10.61 billion |
| Q3 2022 | £10.74 billion |
| Q4 2022 | £9.71 billion |
| Q1 2023 | £5.74 billion |
| Q2 2023 | £4.27 billion |
| Q3 2023 | £4.54 billion |
| Q4 2023 | £3.7 billion |
| Q1 2024 | £4.28 billion |
A typical deposit for a buy-to-let property is usually 25% of the property price, but this can vary between 20% and 40%. The minimum deposit will usually be higher than a standard residential mortgage deposit.
The average gross buy-to-let rental yield for the UK in Q4 2023 was 6.74%, compared with 5.85% in Q4 2022.
There were 13,570 buy-to-let mortgages in arrears of 2.5% or more in the first quarter of 2024, up 93% from the same period in 2023. A total of 600 buy-to-let properties were reposessed in the first quarter of 2024, up 20% from the previous quarter and up 40% from the previous year.
Lloyds Bank was the biggest UK buy-to-let provider in terms of gross lending in 2022, with a market share of 13.1% and total lending of £7.47 billion. Nationwide comes in second place, with an 11.5% market share (£6.55 billion), followed by Natwest Group (10.2% and £5.86 billion), OneSavings Bank (6.2% and £3.56 billion) and Santander (5.5% and £3.14 billion).
| Lender | Buy-to-let lending | Market share |
|---|---|---|
| Lloyds Banking Group | £7.47 billion | 13.10% |
| Nationwide BS | £6.55 billion | 11.50% |
| NatWest Group | £5.86 billion | 10.20% |
| OneSavings Bank Plc | £3.56 billion | 6.20% |
| Santander UK | £3.14 billion | 5.50% |
| Coventry BS | £2.83 billion | 4.90% |
| Yorkshire BS | £2.74 billion | 4.80% |
| Barclays | £2.64 billion | 4.60% |
| Paragon Banking Group | £2.09 billion | 3.70% |
| Virgin Money Plc | £2.05 billion | 3.60% |
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.
Matt Mckenna
UK Head of Communications
T: +44 20 8191 8806
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