Buy-to-let house purchases half in 2023

Overall, the number of new mortgage loans being granted fell from 25,280 in the final quarter of 2022 to 12,422 in the first quarter of 2024. In addition to this, the BTL mortgage shrank for the first time – decreasing from around two million at the start of 2023 to 1.98 million in 2024.  

Rapidly rising 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.  

Additionally, the stamp duty surcharge on second and subsequent properties, and the progressive removal of high-rate income tax relief on mortgage payments has made being a BTL landlord more challenging and less attractive.  

This coincides with the fact that – despite rents increasing – the rising costs of being a landlord means it’s not as profitable as it once was. To put it in context, in the first quarter of 2018 the average interest cover ratio was 342%, compared to 191% at the start of this year.  

Meanwhile, there was a 93% increase in mortgage arrears year-on-year – although the 13,570-figure made up just 0.68% of all BTL mortgages. Of this total, the proportion has risen more among residential mortgage holders because most BTL mortgages are interest-only.  

UK Finance’s head of analytics James Tatch said: “A flexible and well-run rental sector is an essential part of the housing market. Landlords face a number of challenges, from changing regulations to rising interest rates, but have shown resilience.  

“However, 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 buy-to-let sector emerges from last year’s downturn sooner than previously expected. Also, that further rises in arrears are limited.”