UK Finance cautioned landlords with just one rental property “are more likely to feel the pinch from higher interest rates”
Landlords have been warned after new figures showed the number of new UK buy-to-let mortgages granted by lenders has dropped by more than half in just more than a year. The figures have emerged as the value of the sector has declined for the first time in nearly three decades.
UK Finance cautioned landlords with just one rental property “are more likely to feel the pinch from higher interest rates”. Its figures showed that the number of new BTL mortgages granted dropped from 25,280 in the final three months of 2022 to 12,422 in the first three months of 2024.
Rapidly increasing interest rates played a major role in this trend, making it harder for those looking to buy a BTL property to pass lenders’ affordability tests, the organisation added. UK Finance said all these developments had made being a BTL landlord “more challenging and less attractive”.
Despite rents rising, the rising costs of being a landlord mean that it is not as profitable as it once was, it said.
At the end of the first quarter of 2024, 13,570 of the 1.98 million outstanding mortgages were in arrears, according to the figures.
That is up 93% on the same three months a year earlier. However, the banking body said this was still only 0.68% of all BTL mortgages, and that the number had not risen since the final three months of 2023.
James Tatch, Head of Analytics at UK Finance, said: A flexible and well-run private rental sector is an essential part of the housing market. Landlords face a number of challenges, from changing regulations to increasing interest rates, but have shown resilience. Nevertheless, given the new government is committed to abolishing Section 21 “no fault” eviction notices, it must make sure that responsible landlords have other options for when they have legitimate reasons to take their property back.
Without more unexpected negative shocks, strong rental demand and strong lending standards could mean the BTL sector emerges from last year’s downturn sooner than earlier expected. Also, that further rises in arrears are limited.
