2
WHILE SOME LANDLORDS
ARE BEING DETERRED BY
INCREASED LEGISLATION
AND COSTS, THOSE WHO
REMAIN CONTINUE TO
SEE GOOD INCOME
RETURNS.
London Lettings Report Summer 2022 | Affordability 5
£14,314
B-T-L MORTGAGE RATE OF
6.9%
NET ANNUAL INCOME
FOR LANDLORDS
WITH 2-BED FLATS
AFTER MORTGAGE INTEREST PAYMENTS
OR BELOW FOR
LANDLORDS TO PROFIT
LANDLORDS WITH A 2-BED FLAT BASED ON
CURRENT RENTS AND SALES PRICES
Dataloft Rental Market Analytics, ONS, Land Registry,
Bank of England/FCA (mortgage payments assume a
75% LTV interest-only mortgage)
Foxtons, DRMA
LANDLORDS' MONTHLY NET INCOME
Rental yields
Rising costs are also a concern to
landlords, particularly those reliant on
mortgage finance to fund their portfolios.
Current investors, or those looking to
expand their portfolios (the latest English
Private Landlord Survey reports that 11%
of landlords are looking to expand), will
understandably be seeking to ensure that
rental income at least covers 100% of
their mortgage costs.
Rising rents cushion
increasing mortgage rates
There was a time when landlords
contributed to their mortgage payments
and relied on capital appreciation to
justify their investment. More recently,
however, historically low mortgage rates
and rising rents mean rental properties
can be an additional income stream for
landlords. With mortgage rates on the
rise, for now the monthly income return is
being supported by the increase in rents.
It is likely that interest rates will rise further
this year but they would need to result in
a rise in mortgage rates to 6.9%, with no
further increase in rents, for landlords to
see no rental income after paying mortgage
costs. This is considered unlikely. The Bank
base rate is not expected to rise beyond
3.3%, while rents are currently rising at
25%, meaning that investing should
remain affordable for landlords in the
short to medium term.
A landlord's market
The English Private Landlord Survey
reports that 22% of landlords plan to
decrease or completely sell up their rental
portfolio, citing legislative changes and
financial concerns. However, with low
stock, record demand levels and rising
rents there are still returns to be made,
through both income and capital gains.
Foxtons Property Management can advise
on new legislation and help landlords to
maximise their investment.
LANDLORD AFFORDABILITY
Source: Dataloft Rental Market Analytics, ONS, Land Registry, Bank of England/FCA
(mortgage payments assume a 75% LTV interest-only mortgage)
£800
4%
£1,000
5%
£1,200
6%
£1,400
7%
£400
2%
£600
3%
£200
1%
£0
0%
Monthly net income
BTL average mortgage rate
2007 '08 '09 '10 '11 '12 '13 '14 '15 '16 '19
'17 '20
'18 '21 H1
'22
Based on a 2-bed London flat, net of mortgage interest payments