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Tag: Rental Yields

  • 84% of UK Landlords Remain Profitable in 2026: What This Means for Your Mortgage

    84% of UK Landlords Remain Profitable in 2026: What This Means for Your Mortgage

    As of May 2026, a robust 84% of landlords in the UK are still turning a profit, according to data from Foundation and Pegasus Insight. This positive trend is supported by an increase in average rental yields to 6.5% and a rise in both portfolio values and rental income. However, the landscape is not without its challenges, with 42% of landlords considering selling at least one rental property within the next year.

    Impact on Landlords and Tenants

    Profitability and Rental Yields

    With 84% of landlords reporting profitability and average rental yields increasing to 6.5%, the buy-to-let market remains a viable investment option. For instance, a landlord with a £200,000 interest-only buy-to-let mortgage, assuming a rental yield of 6.5%, would receive an annual income of £13,000. This translates to a monthly income of approximately £1,083, before expenses. This is a notable increase from the average rental yield of 6.1% reported 12 months ago.

    Rent Increases and Portfolio Expansion

    Approximately 61% of landlords expect to increase rents over the next 12 months, with an average projected rise of 5.7%. For a tenant paying £800 per month, this could mean an additional £45.60 per month or £547.20 annually. Meanwhile, the average portfolio size has increased to 7.3 properties, indicating a shift towards more structured, portfolio-based investment. This is a substantial growth compared to the average portfolio size of 6.8 properties reported a year ago.

    Challenges Facing Landlords

    Selling Properties and Remortgaging

    Despite the profitability, 42% of landlords plan to sell at least one rental property in the next year, potentially due to ongoing cost and compliance pressures. Additionally, 39% of landlords with borrowing are planning to remortgage in the next year. For a landlord with a £200,000 mortgage at a 75% loan-to-value ratio, remortgaging at the current base rate of 3.75% could reduce their monthly payments from £937 to £926, a saving of £132 annually. This is a significant change compared to the base rate of 3.5% a year ago.

    Void Periods and Rental Arrears

    Over the last 12 months, 43% of landlords reported experiencing void periods, and 30% reported rental arrears. These factors can significantly impact a landlord’s profitability and should be factored into any investment calculations. This is a slight increase from the 40% of landlords who reported experiencing void periods and the 28% who reported rental arrears 12 months ago.

    Impact on First-Time Buyers and Remortgagers

    First-Time Buyers

    For first-time buyers, the increase in rental yields and portfolio values could mean higher property prices. Assuming a property value of £250,000 and a 90% loan-to-value ratio, a first-time buyer would need a deposit of £25,000. With the current base rate of 3.75%, their monthly mortgage payment would be around £1,157.

    Remortgagers

    For those looking to remortgage, the current base rate of 3.75% could offer potential savings. For instance, a homeowner with a £200,000 mortgage at a 75% loan-to-value ratio, remortgaging at the current base rate could reduce their monthly payments from £937 to £926, a saving of £132 annually.

    Frequently Asked Questions

    What is the average rental yield in the UK?

    As of May 2026, the average rental yield in the UK is 6.5%, up from 6.3% six months ago.

    Are landlords planning to increase rents?

    Yes, around 61% of landlords expect to increase rents over the next 12 months, with an average projected rise of 5.7%.

    Are landlords planning to sell their properties?

    Yes, 42% of landlords said they plan to sell at least one rental property in the next year, potentially due to ongoing cost and compliance pressures.

    What is the average portfolio size for landlords?

    The average portfolio size for landlords has increased to 7.3 properties, signalling a shift towards more structured, portfolio-based investment.

  • 84% of UK Landlords Profitable in 2026: What This Means for Your Mortgage

    84% of UK Landlords Profitable in 2026: What This Means for Your Mortgage

    As of May 2026, the majority of landlords in the UK are still turning a profit, with 84% reporting profitability, according to the latest Landlord Trends research from Foundation. This comes amid average rental yields of 6.5% and increasing portfolio values and rental income. However, the landscape is not without its challenges, with 42% of landlords considering selling at least one rental property in the next year.

    Landlord Profitability and Rental Yields

    The latest data, conducted in partnership with Pegasus Insight, shows that despite the current base rate of 3.75%, landlords are still managing to maintain profitability. The average rental yield has edged up to 6.5%, suggesting a healthy return on investment for landlords. For context, this is an increase from the 5.8% yield reported six months ago.

    Scenario: Landlord with a £200,000 Buy-to-Let Mortgage

    Consider a landlord with a £200,000 interest-only buy-to-let mortgage. With a rental yield of 6.5%, they would receive an annual income of £13,000 from their property. Even after deducting mortgage interest payments, which at the current base rate of 3.75% would amount to £7,500 per year, they would still be left with a profit of £5,500.

    Scenario: Landlord with a Portfolio of 7.3 Properties

    The data also reveals that the average portfolio size has increased to 7.3 properties. This indicates a shift towards more structured, portfolio-based investment. For a landlord with 7 properties, each valued at £200,000, the total annual rental income would be £91,000. Even after mortgage interest payments of £52,500, the landlord would still make a profit of £38,500.

    Landlord Challenges and Future Expectations

    Despite the profitability, landlords face challenges. 43% reported experiencing void periods and 30% reported rental arrears over the last 12 months. Additionally, 42% plan to sell at least one rental property in the next year. However, 62% of landlords with lower-rated EPC properties plan to carry out works to meet future requirements, suggesting a willingness to invest in property stock and maintain long-term viability.

    Projected Rent Increases

    Around 61% of landlords expect to increase rents over the next 12 months, with an average projected rise of 5.7%. This is likely a response to the current base rate of 3.75%, which is higher than the 3.25% reported six months ago. This could potentially increase rental income and profitability for landlords.

    Remortgaging Plans

    Nearly four in 10 landlords with borrowing (39%) are planning to remortgage in the next year. This aligns with the current mortgage rates and could potentially lower their monthly payments, further boosting profitability.

    Frequently Asked Questions

    What is the average rental yield for landlords?

    The average rental yield for landlords is currently 6.5%, an increase from the 5.8% reported six months ago.

    What percentage of landlords are currently profitable?

    According to the latest data from Foundation, 84% of landlords in the UK are currently profitable.

    What percentage of landlords plan to increase rents in the next 12 months?

    About 61% of landlords plan to increase rents over the next 12 months, with an average projected rise of 5.7%.

    What percentage of landlords are planning to remortgage in the next year?

    Approximately 39% of landlords with borrowing are planning to remortgage in the next year, potentially taking advantage of competitive mortgage rates.