Spike in landlords borrowing to buy properties as rents soar

Spike in landlords borrowing to buy properties as rents soar Mortgages lent to landlords rose sharply in late 2024, UK Finance data shows By ED MAGNUS Updated: 07:39 EDT, 2 April 2025 e-mail View comments The number of landlords taking out buy-to-let mortgages rocketed in the final three months of last year, new data has revealed. This comes in contrast to reports of more landlords selling up , as a result of higher taxes, interest rates and tightening regulation. UK Finance data shows that in the final three months of 2024, there were 52,648 new buy-to-let mortgages , worth £9.

6billion. This includes both purchases and remortgages, and is a 39.2 per cent increase compared to the same period in 2023.



Looking at purchase mortgages alone, the jump in buy-to-let loans is even greater. In the final three months of 2024 there was a 46.4 per cent increase in buy-to-let mortgages taken out to buy a property, compared to the previous year.

UK Finance also says the total value of the mortgages taken out has increased 47.2 per cent compared to the previous year. Back in business: Buy-to-let activity was on the rise at the end of 2024, according to new data Why are landlords borrowing more? While the UK Finance figures do show a big rise in activity, this comes off a particularly low base at the end of 2023 when mortgage rates hit their recent peak, leading home buyers and investors alike to put property plans on hold.

Russell Anderson, commercial director of mortgages at buy-to-let lender Paragon Bank, says: 'These figures reveal a resurgent buy-to-let market throughout 2024, with strong growth in both purchase and remortgage activity. 'The data supports our view that landlords are astutely managing their lettings businesses, borrowing to invest in higher-yielding properties or refinancing to proactively manage debt across portfolios and improve privately rented housing stock. 'While encouraging, this increase is against a low base in 2023 and there continues to be an acute supply demand imbalance in the private rented sector, underpinning rental inflation .

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Share this article Share HOW THIS IS MONEY CAN HELP Looking for a new mortgage? Check out the best rates here Rents have been rising faster than house prices in recent years, making buy-to-let property a more attractive investment - though landlords will still have to factor in new costs such as increased stamp duty into their profits. The average asking rent has increased 40 per cent in the last five years, rising from £1,087 per month to £1,526 per month, according to Rightmove. Meanwhile, asking prices on the sales market are up by 19 per cent in five years over the same period, rising from £312,625 to £371,870.

This results in better gross rental yields for landlords. The gross rental yield is the percentage of return an investor can expect to make back on the purchase price each year, before tax and other costs are taken into account. For example, if a landlord made £10,000 in rent per year on a £200,000 property, the yield would be 5 per cent.

The average gross buy-to-let rental yield for the UK in the final three months of 2024 was 7 per cent, compared with 6.74 per cent a year earlier. Mortgage costs have also come down somewhat from the highs recorded in 2023.

The average interest rate across all new buy-to-let loans was 5.09 per cent in the final three months of 2024, according to UK Finance's latest figures. On a £200,000 interest-only mortgage, a type of loan common among landlords, that would mean paying £848 a month.

The 5.09 per cent average was 0.61 percentage points lower than in the final three months of 2023.

Changing of the landlord guard Richard Donnell, executive director at Zoopla, believes there has been a 'changing of the guard' when it comes to landlords. Older, smaller or accidental landlords are selling up, he says, while bigger landlords continue to expand their portfolios. Read More Homes are getting MORE affordable, according to these three key measures 'The private rented sector stopped growing in 2016 when tax changes shifted the business model and has since been stuck at 5.

5million homes, with landlords buying offset by landlords selling,' says Donnell. 'There has been no exodus. The people selling are smaller landlords who didn't see buy-to-let as a business - such as the 40 per cent of landlords who originally bought their first property to live in.

' He says buy-to-let is in a 'consolidation phase' whereby an increasing chunk of rental properties are owned by a shrinking group of large, portfolio landlords who are looking for 'modest leverage and cashflow.' 'Half of the private rented sector is owned by 20 per cent of landlords with the largest portfolios,' he says. 'Small, one-property landlords have shrunk from 80 per cent to less than 50 per cent.

' Best buy-to-let mortgage rates and how to find them Many landlords who own with a mortgage will be seeing their profits decimated by higher mortgage rates, having been lulled into a false sense of security by the ultra-cheap finance available in recent years. That makes it even more important to search out the best possible rate for you and get good mortgage advice. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.

This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit a property's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes and also look at the best tracker rates. Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002).

The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage. Share or comment on this article: Spike in landlords borrowing to buy properties as rents soar e-mail Add comment Some links in this article may be affiliate links.

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