A quarter of landlords want to sell at least one property in the next 12 months, as taxation changes and government reforms continue to bite.
That’s based on market research by the Residential Landlords Association (RLA), which shows landlord confidence has dropped significantly in front of the introduction from the tenancy fees ban the following month.
But is property investment still worthwhile, or perhaps is now the time to sail off in to the sunset? Here, we explain the advantages and disadvantages of selling, remortgaging and investing.
Landlords losing confidence in buy-to-let
Landlord confidence in buy-to-let is at the lowest level because the RLA started its monthly survey in 2022, having a quarter of their 2,500 respondents saying they’ll look to sell at least one property within the next year.
This may come as two regulatory changes threaten to impact the way landlords let their houses.
First of all, the tenant fees ban comes into force next month. From 1 June, letting agents is going to be banned from charging fees to tenants for things such as referencing, inventories and contracts, while deposits will be limited at five weeks’ rent. This move is likely to result in higher bills for many landlords.
In addition, the federal government is consulting on overhauling the Section 21 eviction process, that allows landlords to evict tenants with less than eight weeks’ notice once their contract term has expired.
So, if you’re facing mounting bills, as well as an uncertain market, what in the event you do? We outline a number of your options below.
Option 1: Selling up – things you’ll have to consider
If you’ve resolved to sell one or all your buy-to-let properties, you’ll need to think about the following things when preparing your exit strategy.
Option 2: Remortgaging – cheap buy-to-let rates
While some landlords want to sell up, others are taking advantage of attractive mortgage rates to refinance their portfolios.
The most recent data from UK Finance (according to lending in February) demonstrated that while new buy-to-let mortgage lending was down 14.3% year-on-year, remortgaging was up by 4.5%, hitting lb2.3bn.
And since then, buy-to-let mortgage rates have continued to drop. As you can see in the chart below, average rates on fixed and variable buy-to-let mortgages have fallen significantly over the last couple of months.
But what does this suggest in practice? The table below shows the cheapest initial rates landlords can also enjoy on remortgaging deals at different loan-to-value (LTV) ratios.
| Max LTV | Two-year fix | Three-year fix | Five-year fix | Two-year tracker | Two-year discount |
| 60% | 1.47% (Barclays) | 1.79% (TSB) | 1.99% (Sainsbury’s) | 1.39% (The Mortgage Works) | 1.7% (Principality) |
| 65% | 1.49% (The Mortgage Works) | 2.05% (Coventry) | 2.09% (The Mortgage Works) | 1.39% (The Mortgage Works) | 1.74% (Nottingham) |
| 75% | 1.69% (Sainsbury’s) | 2.18% (Mailbox) | 2.32% (Sainsbury’s) | 1.69% (Santander) | 1.99% (Hinckley & Rugby) |
As you can see, it’s easy to get attractive rates of below 2% on both fixed and variable deals. If you’re thinking of remortgaging, you’ll also needs to consider any upfront fees and the total cost of borrowing before rushing in.
Option 3: Investing – making the most of property prices
Landlords seeking to expand their portfolios may need the current house-price lull.
The most recent Land Registry House Price Index showed that after months of stagnation, property prices fell by 0.6% month-on-month in February, while the annual increase was just 0.6%.
It goes without saying that property prices can differ dramatically by region, town, as well as street, but generally speaking, a slow market could offer an opportunity for investors to grab a bargain.
With capital growth currently really low in many areas, you’ll need to concentrate on the yield you could achieve allowing your home.
Research through the estate agency Hamptons International discovered that average yields crept as much as 5.9% in the other half of 2022, with investors in the North of England enjoying yields of up to 11% in certain towns.
When you’re shopping around for a new property, listed here are five things to consider:
