Findings from the Intermediary Mortgage Lenders Association (IMLA) regarding the financial challenges faced by landlords in the UK, particularly small-scale landlords with mortgages, suggests many landlords say they’re set to expand investments in 2024 . Here are the key points:

• Anticipated Higher Costs: Despite the prospect of facing up to 80% higher costs in the next two years, many landlords express their intention to expand their property investments in 2024.
• Financial Challenges for Small-Scale Landlords: Small-scale landlords with mortgages are expected to struggle to break even in the next two years due to a significant increase in the cost of borrowing. This increase is anticipated to be around 80% as landlords refinance off historically low fixed rates.
• Typical Financial Position of Landlords: The research reveals that the median average annual rental income is £14,000, with the median average annual profit being less than £9,000. Landlords are expected to face an average increase in annual interest payments of £7,700 by 2025.
• Landlords’ Resources and Ownership Distribution: Contrary to popular belief, most landlords do not have significant resources outside their rental business. The majority (80%) of landlords own one or two properties, accounting for 61% of the private rented stock. Only 13% are classified as portfolio landlords, owning four or more properties, making up 39% of the stock.
• Impact of Tax and Legislation Changes: Tax and legislation changes have impacted the viability of many small-scale landlord businesses. While only 36% of respondents believe they are paying more tax due to the removal of the mortgage interest deduction, IMLA calculates that 58% will actually be paying more tax based on income data.
• Landlords’ Commitment to the Private Rental Sector (PRS): Despite the challenges, the majority of landlords express their commitment to remaining in the private rental sector for the longer term. IMLA forecasts that 53% of mortgaged landlords plan to buy more rental property over the next five years.
• Potential Rent Increases: The research suggests that many landlords may need to increase rents to keep their businesses viable in the face of rising costs. Even debt-free landlords may consider raising rents to achieve adequate returns.
• Policy Considerations: The IMLA emphasizes the importance of policymakers understanding the financial pressures on landlords and urges caution in adopting policies that could disrupt the delicate balance within the private rental sector. The association suggests that policies should not deter small businesses, which form the backbone of the sector, from continuing to invest.

In summary, the findings highlight the financial challenges faced by landlords, the potential need for rent increases, and the commitment of many landlords to remain in the private rental sector despite the difficulties.