Morningstar DRBS’ commentary on the implications of the Renters’ Rights Act said that a reduction in the supply of PRS homes could sustain rental growth and landlords still in the market could become “increasingly selective in their choice of tenants”.
It said the act and existing cost pressures were likely to increase regulatory burden, thereby discouraging marginal investors and speeding up exits for landlords with lower margins or higher leverage.
However, it said for securitised BTL portfolios, particularly those with “seasoned collateral with conservative underwriting” and borrowers with “substantial equity buffers”, the impact would be absorbed and support the stable credit ratings outlook.
Morningstar DBRS said originations had rebounded in 2024 after significantly contracting in 2023, then stabilised last year. However, it said this remained constrained by “persistent cost pressures and evolving regulatory and tax changes”.
BTL mortgage advances declined by around 40% in 2025 compared to 2022 levels, and Morningstar DBRS said pressures of regulatory changes and macroeconomic headwinds could make this “intensify further as the act is implemented”.
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It said the Renters’ Rights Act would add to these headwinds and limit growth in 2026, remaining below pre-2022 levels.
Renters’ Rights Act could indirectly worsen BTL arrears
The firm said BTL mortgages in arrears had moderated after increasing in 2022, but remained above earlier levels. It said while the act was not a direct driver of BTL arrears, it would “indirectly add pressure by reducing landlord flexibility and affecting income resilience”.
It said the removal of Section 21 evictions meant landlords now needed to rely on fault-based evictions, which could extend possession timelines and increase carrying costs.
Arrears performance may weaken in the near term, a result of extended vacancy periods and refinancing pressures, the agency said.
A more sophisticated PRS
The agency said the pressure of regulatory changes and higher financing costs was “weighing more heavily” on smaller mortgaged landlords, “potentially driving them from the market and increasing institutional participation”.
It said this would push the PRS toward corporate or legal entity ownership, and the evolving regulatory environment would favour “more sophisticated, professionally managed landlord operations”.
Morningstar DBRS said: “Overall, the Renters’ Rights Act is likely to add momentum to underlying market shifts, in the UK BTL market, while its direct impact on securitised credit performance is likely to remain contained.”
