The Foundation Landlord Trends report covering Q4, comprising 837 responses, suggested that a third of landlords were looking for new finance, refinancing or a product transfer in the last 12 months.
This rose to six in 10 among landlords who already had BTL loans. Foundation said this highlighted the importance of brokers and specialist lenders in supporting landlords with increasingly complex portfolios.
On average, landlords have around six-and-a-half individual BTL loans across two lenders, borrow £714,000 and have an average loan-to-value (LTV) ratio of just under 50%.
Some seven in 10 landlords used a broker to obtain their most recent mortgage, with the majority starting the process at least three months before their deal matured.
The lender said this indicated a considerable number of landlords were planning ahead and relying more on professional advice.
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Reservations about the Renters’ Rights Act
The research showed that limited company and portfolio landlords had different behaviours to smaller, individual landlords.
Limited company landlords tend to have larger portfolios and are more likely to use BTL finance, as well as being more active with refinancing and rent reviews. These landlords also tend to be more engaged with regulatory change.
Around three-quarters of landlords knew of the Renters’ Rights Act, up 8% compared to the last survey, and limited company landlords had the most awareness.
Attitudes towards the legislation were negative, as 75% of respondents said the act would have a negative impact on their own lettings activity and 84% believed it would be bad for the private rental sector as a whole.
Landlords were most concerned about potential delays in the court system holding up possessions, with worries about this overshadowing energy-efficiency requirements and tax changes.
Some respondents said certain elements of the Renters’ Rights Act were influencing their decisions around planned rent increases, as well as higher running costs and taxes.
Despite the pessimism, Foundation found that the private rental sector was still profitable, as 85% of landlords reported making a profit from their lettings activity. This has slightly eased since the last quarter, however, as the average rental yield fell from 6.6% to 6.4%. Foundation said this was still “strong by historic[al] standards”.
Still, landlords are cautious about the future and nearly half plan to sell at least one property in the next 12 months, compared to the 5% who intend to buy. Foundation said this suggested that landlords were reshaping their portfolios rather than panicking, and more established landlords would remain active in the market.
Grant Hendry, director of sales at Foundation, said: “While confidence has softened slightly, the underlying behaviour of professional landlords remains very clear. They’re still borrowing, refinancing and seeking advice in significant numbers, and they’re doing so earlier and more carefully than before.
“The complexity of portfolios, combined with regulatory change such as the Renters’ Rights Act, means brokers and specialist lenders have an increasingly important role to play. This is not a market stepping away from the private rental sector or BTL, or the finance needs required in this space, but it is one that is becoming more selective and more reliant on experience and support.”
He added: “Concerns around possession, court delays and future regulation are clearly shaping landlord behaviour, particularly for smaller operators. However, professional landlords continue to adapt their strategies and remain focused on long-term sustainability. That is where Foundation’s ability to deliver specialist lending, manual underwriting and strong broker relationships really matter.”
