Around 55% of landlords are concerned about rent controls, stating that they would greatly impact their commitment to operating in the BTL sector, revealed the latest Foundation Home Loans’ Landlord Trends report for Q2 2024.
The study — which comprised 799 online interviews with landlords carried out between June and July — found that one in three landlords would consider selling their properties if rent controls were introduced.
According to the data, the abolition of section 21 is also a big concern for landlords.
However, they are less worries about other potential regulatory changes, such as outlawing bans on specific tenant types, compulsory licensing, or abolishing fixed-term contracts in favour of rolling contracts.
The report also showed that average rental yields have reached a 10-year high of 6.3%, with 82% of landlords describing the tenant demand as strong.
Around 60% of landlords borrow to fund their portfolios, holding an average of 5.3 loans — rising to 14.4 loans for those with over 11 properties in their portfolio.
On average, landlords owe £665,000 in total, equating to round £125,000 per BTL property — total borrowing ranges between £268,000 for non-portfolio landlords and £1.16m for portfolio ones.
Due to the increasing portfolio management expenses and rising mortgage finance costs, the incidence of rental increases has tripled in the last four years, with 74% of landlords raising rents in Q2 this year.
According to the report, landlords continue to prefer opting for limited company ownership, especially for new purchases, with 67% of new acquisitions now held within a company structure.
Over one-third of respondents plan to remortgage or undertake a product transfer in the next 12 months, with landlords anticipating they will refinance 2.5 products on average.
Of those who will be refinancing, 38% have one mortgage to refinance, 34% two, 12% three, 8% four, and 7% have over five mortgages due for maturity in this timescale.
According to Foundation, the level of loans coming up for remortgage, and the average amounts being owed, presented a sizeable opportunity for mortgage advisers to offer competitive refinancing solutions and to earn strong levels of procuration fees from those remortgages.
Grant Hendry, director of sales at Foundation Home Loans, commented: “Despite a challenging market environment, landlords are finding ways to maintain profitability and expand their portfolios.
“Average rental yields increasing, the ongoing preference for limited company ownership and high tenant demand are all encouraging trends which keep on emerging and should provide mortgage advisers with opportunity to secure business and help landlords navigate the market.
“There is clearly a significant remortgage market to target in the months and weeks ahead, with a number of the landlords surveyed outlining how they had multiple mortgages coming to an end which will need refinancing.
“In an interest rate environment which has seen some falls already, we believe the opportunity to remortgage is now greater than in the last couple of years, and we’ll see a growing cohort of landlord borrowers able to remortgage to a different lender rather than simply have to accept a product transfer.
“Again, this presents a strong opportunity as it doesn’t just bring the remortgage into ‘play’ but clearly the opportunity to talk to existing landlord borrowers about any other product/service wants and needs they might have.”
