Faced with increasing operational costs, buy to let landlords across the UK have been proactively adjusting their financial strategies over the past 18 months, according to a new study by Foundation Home Loans. This report shows how landlords are dealing with economic hurdles by renegotiating mortgages, escalating rental prices, and in some instances, opting to sell their properties.
The study, which gathered insights from over 770 landlords, highlights a significant shift in financial management tactics among property owners. About 30% of landlords have successfully renegotiated their existing mortgage agreements to secure better terms. Concurrently, another 29% have opted to increase rents to cope with their heightened expenses. This approach helps them maintain profitability without excessively burdening their tenants.
Strategic Decisions in Property Management
Interestingly, 25% of landlords have paused their plans to acquire additional properties, indicating a cautious approach towards expansion in uncertain economic times. Furthermore, landlords are also seeking to cut down on property management costs. Approximately 17% have started handling more management tasks themselves, while 8% have transitioned from using property management services to self-managing their properties. This shift not only helps in reducing expenses but also gives landlords more direct control over their investments.
Adapting to Economic Pressures
Grant Hendry, the director of sales at Foundation, emphasised the landlords’ strategic responses to the financial pressures, especially those stemming from increased mortgage costs. “Landlords have been using all options at their disposal when it comes to mitigating the increase in mortgage costs they have seen as a result of higher rates,” Hendry explained. He elaborated that many landlords have resorted to remortgaging for better rates, using savings, or even selling off properties to avoid passing on the cost increase to tenants.
Despite the previous high rates in 2023, Hendry noted that there are signs of improvement, although many landlords are still preparing for the expiration of their current mortgage deals by looking for cost-effective solutions.
Signs of Optimism in the Private Rental Sector
Despite these challenges, the report indicates a resilient outlook for the private rental sector. More than 40% of landlords are planning to remortgage or transfer their mortgages within the next year, reflecting a proactive approach to financial management. Additionally, 68% of landlords have utilised mortgage advisers for their recent buy to let mortgages, underscoring the value they place on expert financial guidance.
Future Investment and Market Dynamics
Looking ahead, 48% of landlords intend to secure buy to let (BTL) mortgages for future investments, while 38% plan to purchase additional properties outright. A similar percentage of landlords are also considering releasing equity from their existing properties.
Hendry concludes with a note of optimism, “It clearly remains challenging times for landlords, but they are maintaining the profitability of their portfolios, yields continue to rise, plus there remains strong tenant demand against a backdrop of relatively low supply and higher population numbers seeking housing.”