The survey of 754 landlords in quarter one this year highlighted the impact of tougher affordability rules introduced by the Prudential Regulation Authority (PRA) from 1 January.
The PRA’s rules require a more detailed assessment of a borrower’s personal finances, and stress testing at a higher interest rate of 5.5%.
Some 6% of landlords surveyed said they had been rejected for a mortgage for their buy-to-let property.
The flurry of tax and regulatory changes, combined with recent reports of weakening house prices,
has knocked landlords’ confidence. Some 41% of landlords were positive over the prospects of their portfolios in quarter one, slightly down from 44% in the previous quarter.
Those with a positive outlook still outnumber those with negative expectations, but this has fallen from the 67% of landlords who were confident three years ago.
Analysis of Council of Mortgage Lender (CML) data showed buy-to-let house purchase activity fell as stricter affordability checks, taxation of second homes and changes to mortgage interest relief took hold.
House purchase transactions were down 63% year-on-year in Q1, as 18,100 mortgages were issued to those looking to secure a buy-to-let property.
Remortgage activity remains robust, however. Many landlords refinanced properties in March last year to beat the deadline of the introduction of the 3% Stamp Duty levy on second homes.
The spike in buy-to-let purchase activity seen in March 2016, was expected to create a significant gulf in year-on-year activity levels. The market, however, remained resilient.
CML data showed there were 38,000 remortgages in Q1 2017, 12% fewer than in Q1 2016, and 2% more than in the last quarter of 2016, as investors took advantage of historically low interest rates to reduce their outgoings.
Average rents per property have seen gentler growth in the last year, rising by 1.9% to £889 per month.
Rents have grown more rapidly than house prices in the last two quarters, rising by 0.6% in the first quarter of the year, and 0.2% in the previous quarter.
As rent inflation outstrips house prices, the average yield has edged up from 4.4% in the second quarter of last year to 4.5%, reversing the trend of declining yields evident since early 2015.