Buy-to-let rents bringing in 7% returns to landlords

Yahoo

4 days ago

Landlords are getting around 7% returns on their rented properties as high interest rates amid a cost of living crisis are keeping Britons from jumping on the housing ladder.
According to figures from UK Finance, the average gross buy-to-let rental yield in the UK in the first three months of the year was 6.94%. That is a slight increase from 6.88% in the same quarter last year.
The returns appear to be attracting more investors into the buy-to-let market, with 58,347 new buy-to-let loans advanced in the UK in the first quarter, a 38.6% increase. These loans totalled £10.5bn, which is again an increase (46.8%) compared to the same time last year.
Richard Donnell, executive director at Zoopla, said: "Activity from buy-to-let 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 prices inflation."
Read more: Average London rent surges to £2,252 a month
The average interest rate across all new buy-to-let loans in the UK was 4.99% in Q1 2025. This was 10 basis points lower than in the previous quarter, and 41 basis points lower than in the same quarter of 2024.
However, at the end of Q1 2025, 11,830 buy-to-let mortgages were in arrears greater than 2.5% of the outstanding balance, down 780 from the previous quarter.
Nathan Emerson, CEO at Propertymark, said: 'It is positive to witness what we hope is a wider scale revival in buy-to-let lending across Q1 of 2025. This trend has likely been encouraged by interest rates on buy-to-let loans being lower than they were in the same quarter for 2024. These numbers demonstrate that more competitive interest rates are helping to attract more people to the buy-to-let market.
'However, with mortgage possessions up this quarter from the same quarter a year previously, these figures also highlight there are still significant affordability issues for those engaging in buy-to-let borrowing in recent years.
'The Bank of England continues to work hard managing inflation levels, and the direction of travel here will prove key within all base rate decisions moving forwards.'
In the first quarter of 2025, 810 buy-to-let mortgage possessions were taken, up 28.6% from the same quarter a year earlier.
Read more: First-time buyers on £30k salary now able to apply for mortgage
'Buy-to-let lending in the first quarter of the year was the highest seen since the mini-budget and in line with pre-pandemic levels, primarily driven by a surge in new purchase activity ahead of the changes to stamp duty thresholds at the end of the quarter,' said Louisa Sedgwick, managing director of mortgages at Paragon Bank.
'This shows that with the right market conditions landlords will invest. Demand currently exceeds supply and is forecast to continue, driven by factors such as population increases and household formation changes.
'To meet this demand and help to moderate rent inflation, as well as to provide a home to millions of tenants across all walks of life, it is essential to facilitate an attractive investment environment with balanced regulation and economic stability."