While the average rental yield has reached a 10-year high of 6.3 percent, landlords have expressed concerns about rent control, according to data from the Foundation Home Loans.

In Pegasus Insight’s Landlord Trends report for Q2 2024, 60% of landlords said they have borrowed to finance their portfolio, holding an average of 5.3 loans.

For companies with more than 11 properties in their portfolio, this figure rose to 14.4 loans.

More than a third plan to refinance or switch products in the next 12 months, with landlords expecting to refinance 2.5 products on average. Of those refinancing, 38% have one mortgage to refinance, 34% have two, 12% have three, 8% have four and 7% have more than five mortgages due to mature in the period.

Borrowers’ total debt averaged £665,000, which equates to approximately £125,000 per buy-to-let (BTL) mortgage.

The total loan amount was £268,000 for landlords without a portfolio – that is, those with one to three buy-to-let mortgages – and £1.16 million for landlords with a portfolio.

One in five landlords had debts of over one million pounds.

According to the Foundation, the size of mortgages up for refinancing and the average amounts owed offer a significant opportunity for mortgage advisers to offer competitive refinancing solutions and earn high brokerage fees from these refinancings.

A number of other notable trends emerged from this edition of the Landlord Trends report.

One of these is the continuing increasing preference of landlords for limited company ownership, particularly for new acquisitions: 67% of new acquisitions are now held within a company structure.

Of the 10% of landlords who said they would like to grow their portfolio over the next 12 months – with several options available to them – 67% said they would take out a buy-to-let mortgage, 29% would buy outright, 31% would release equity from existing properties, 10% would borrow money through a business loan and 5% would use funds from a pension fund.

The frequency of rent increases has tripled in the last four years; in the second quarter of 2024, 74% of landlords increased rents.

This trend is due to rising portfolio management expenses and rising mortgage financing costs.

The Landlord Trends report also looked at a particular ‘hot topic’ in the private rental sector and its potential impact on landlords: rent control.

Rent controls and changes to the law, such as the abolition of Paragraph 21 (termination without fault), were at the top of the landlords’ agenda.

55% said that rent controls would seriously affect their commitment to rent, and one in three would consider selling their property if controls were introduced.

According to the report, landlords are less concerned about other possible regulatory changes, such as banning certain types of tenants, requiring licensing or abolishing fixed-term contracts in favor of open-ended contracts.

Grant Hendry, Head of Sales at Foundation Home Loans, said: “Despite a difficult market environment, landlords are finding ways to maintain profitability and grow their portfolios.

“Rising average rental yields, continued preference for limited company ownership and strong tenant demand are all encouraging trends that continue to emerge and should provide opportunities for mortgage advisers to close deals and help landlords navigate the market.

“There is clearly a significant remortgage market that we need to target in the coming months and weeks. Many of the landlords we surveyed said they had several mortgages expiring and needed to refinance.”

He added: “In an interest rate environment where there have already been some declines, we believe the opportunity to remortgage is now greater than in previous years and we will see a growing group of borrowers who will be able to remortgage their mortgage to another lender rather than simply having to accept a product switch.

“This is a great opportunity again as not only does debt restructuring come into play, but there is also an opportunity to talk to existing borrowers about any other product/service needs and wants.

“Even with higher yields and strong tenant demand, the cost of financing properties and portfolios continues to weigh heavily on landlords and influence their assessment of whether now is the time to expand their portfolios.

“It is to be hoped that the new government will work to expand supply in the PRS, as more housing will certainly be needed to meet the obvious demand from tenants.”

Hendry concluded: “As the market continues to evolve, we would urge advisers to keep up to date with regulatory changes such as potential rent controls and the abolition of Section 21.

“With expert advice and comprehensive mortgage solutions, advisors can help landlords overcome these challenges and seize opportunities to ensure the continued growth and profitability of their portfolios.”