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The buy-to-let (BTL) mortgage market shrank for the primary time within the first quarter of this yr, as excessive rates of interest hit landlords’ profitability.
New information from commerce physique UK Finance confirmed that there have been 2.039 million excellent BTL mortgages within the first quarter of 2023, which fell to 1.98 million within the first quarter of 2024.
New loans for BTL home purchases have additionally fallen considerably. 25,280 new loans have been issued within the final quarter of 2022, down to simply 12,422 within the first quarter of this yr.
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UK Finance attributed the decline to excessive rates of interest, which make it more durable for these seeking to purchase a BTL property to cross lenders’ affordability assessments.
The stamp obligation surcharge on second properties, which got here into drive in 2016, and the progressive elimination of BTL tax reduction, have additionally made it more durable for landlords to make a revenue regardless of rents rising.
Within the first quarter of 2018, the common curiosity cowl ratio – how a lot of a landlord’s mortgage prices are coated by their rental earnings – was 342 per cent. Within the first quarter of 2024 it was all the way down to 191 per cent.
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Regardless of the market challenges, simply 0.68 per cent of all excellent BTL mortgages are in arrears, equating to 13,570 loans. The quantity has not elevated because the final quarter of final yr.
“A versatile and well-run personal rental sector is a necessary a part of the housing market,” mentioned James Tatch, head of analytics at UK Finance.
“Landlords face various challenges, from altering rules to rising rates of interest, however have proven resilience.
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“Nevertheless, given the brand new authorities is dedicated to abolishing Part 21 ‘no fault’ eviction notices, it should ensure that accountable landlords produce other choices for after they have authentic causes to take their property again.
“With out extra surprising unfavourable shocks, robust rental demand and powerful lending requirements may imply the buy-to-let sector emerges from final yr’s downturn prior to beforehand anticipated. Additionally, that additional rises in arrears are restricted.”
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