As interest rates rise, landlords are making their lowest profits in 16 years, which is prompting some to consider leaving the industry, according to real estate firm Savills.
It claimed that rising mortgage costs and the Bank of England's base rate's twelve consecutive increases were putting pressure on landlords' income.
Smaller buy-to-let investors were also frequently approaching or in retirement.
Renting might become more expensive and fewer homes might be available if they decide to sell.
According to Lucian Cook, head of residential research at Savills, "after a boom period for buy-to-let landlords, 2023 marks a turning point for Britain's private rented sector.".
"There is a very real chance that landlords, especially those with high levels of debt, will leave the industry, adding to the pressure in a market where demand is often much higher than supply. " .
Interest rates have been rising since the beginning of 2021, and in recent days, anticipation of further increases has grown.
Markets expect inflation and interest rates to remain higher for longer than previously anticipated in light of data on rising wages and prices.
As a result, government borrowing costs, which directly affect mortgage rates, have increased to their highest level since the mini-budget of last year.
Landlords are particularly vulnerable as a result of the anticipated increase in mortgage rates.
Savills reported that data from the first three months of the year indicated that buy-to-let investors had already felt the pinch, with net profits falling below 4% - the lowest since 2007. This contrasts with profits of up to 23% during the last decade of record-low interest rates.
Larger landlords may be more likely to remain in the industry, according to the report.
According to Savills research, 1.9 million properties are owned by 620,000 landlords over the age of 65, and an additional 1.9 million properties are owned by landlords between the ages of 55 and 64.
According to Mr. Cook, tenants would have fewer options if they chose to leave. He also suggested that renters with higher salaries and more stable jobs could get first dibs on the remaining properties.
Find out more about your rights as a renter and where to find assistance here.
The percentage of mortgages granted to investors in buy-to-let properties has dropped to its lowest level since 2011, according to recently released data from the Bank of England.
The data also demonstrated the dramatic decline in overall mortgage lending during the first quarter of the year.
The total amount of mortgage debt was £58.8 billion, a decrease of 23.6% from the previous year. A rise in people missing mortgage payments was also noted by the Bank.
According to the financial information service Moneyfacts, since then, mortgage rates have increased for borrowers looking for a new deal. A typical two-year fixed-rate deal is now available at a rate of 5.9 percent. The typical interest rate for a five-year fixed-rate mortgage is 5.15%.
