Rental yields have surged to a 10-year peak of 6.3%, yet landlords are increasingly anxious about the looming threat of rent control, according to data from Foundation Home Loans.

In its Q2 2024 Landlord Trends report, compiled by Pegasus Insight, a striking 60% of landlords disclosed that they had borrowed funds to bolster their property portfolios, with an average of 5.3 loans per borrower.

This figure skyrockets to an average of 14.4 loans for those with over 11 properties under their management.

A significant portion, more than one-third, plans to remortgage or carry out a product transfer within the next 12 months. On average, landlords expect to refinance about 2.5 products. Among those set to refinance, 38% have one mortgage, 34% have two, 12% have three, 8% have four, and 7% have more than five mortgages due for renewal during this period.

Landlords are carrying a considerable financial burden, with the average debt totaling £665,000—roughly equating to £125,000 per buy-to-let (BTL) mortgage.

Total borrowing varies widely, from £268,000 for non-portfolio landlords—those with one to three BTL mortgages—to a hefty £1.16 million for portfolio landlords. Astonishingly, one in five landlords owes more than £1 million.

Foundation Home Loans highlighted that the volume of mortgages approaching the need for remortgaging, coupled with the substantial amounts owed, presents a significant opportunity for mortgage advisers. These professionals could offer competitive refinancing solutions and, in doing so, secure substantial procuration fees from these transactions.

Several other noteworthy trends emerged from this edition of the Landlord Trends report.

One of the most pronounced is the growing inclination among landlords to hold properties within a limited company structure, especially for new acquisitions. Currently, 67% of new property purchases are conducted under a company name.

Among the 10% of landlords planning to expand their portfolios within the next year, 67% intend to use a buy-to-let mortgage, 29% aim to purchase outright, 31% will release equity from existing properties, 10% will borrow via a commercial loan, and 5% plan to tap into pension funds.

Rental increases have surged, tripling over the past four years, with 74% of landlords raising rents in Q2 2024. This trend has been driven by rising costs in portfolio management and the increasing expense of mortgage financing.

The Landlord Trends report also delved into a particularly contentious issue within the private rental sector: rent controls.

Rent controls, along with legislative changes such as the removal of Section 21 (no-fault evictions), have become a major concern for landlords. A substantial 55% indicated that rent controls would significantly affect their willingness to continue renting out properties, with one in three considering selling their properties if such controls were implemented.

Conversely, landlords appeared less concerned about other potential regulatory changes, such as banning discrimination against specific tenant types, mandatory licensing, or replacing fixed-term contracts with rolling contracts.

Grant Hendry, director of sales at Foundation Home Loans, remarked: “Despite a challenging market environment, landlords are finding ways to maintain profitability and expand their portfolios.

“Average rental yields increasing, the ongoing preference for limited company ownership, and high tenant demand are all encouraging trends which keep on emerging and should provide mortgage advisers with the opportunity to secure business and help landlords navigate the market.

“There is clearly a significant remortgage market to target in the months and weeks ahead, with a number of the landlords surveyed outlining how they had multiple mortgages coming to an end which will need refinancing.”

He further added: “In an interest rate environment which has seen some falls already, we believe the opportunity to remortgage is now greater than in the last couple of years, and we’ll see a growing cohort of landlord borrowers able to remortgage to a different lender rather than simply have to accept a product transfer.

“Again, this presents a strong opportunity as it doesn’t just bring the remortgage into ‘play’ but clearly the opportunity to talk to existing landlord borrowers about any other product/service wants and needs they might have.

“The cost of financing properties and portfolios, even with higher yield and strong tenant demand, continues to sit heavily with landlords and is impacting their views on whether now is the time to add to portfolios.

“It is to be hoped the new Government is committed to increasing supply in the PRS, as it certainly requires more housing in order to meet the tenant demand that is so clearly there.”

Hendry concluded: “As the market evolves, we would urge advisers to stay informed about regulatory changes such as potential rent controls and the removal of Section 21.

“By providing expert advice and comprehensive mortgage solutions, advisers can help landlords navigate these challenges and capitalise on opportunities, ensuring the continued growth and profitability of their portfolios.”