Landlords have effectively lost more than £4,000 in earnings per property during the last year thanks to soaring mortgage rates and rising costs.

A landlord taking out a two-year fixed-rate BTL mortgage in June 2022 would have received an average monthly return of £609 from rental income after paying interest, adding up to £7,312 a year, according to personal finance comparison site finder.com.

Taking out that same mortgage in June 2023 would have made 59% less in average monthly returns at just £250, working out at £2,995 – a drop of £4,317 in yearly income.

New deal

The platform compared monthly average buy-to-let mortgage rates, house prices and rent prices to estimate the returns and believes the rising cost of owning a rental property has made it far less appealing for landlords to sign up for a new deal.

Buy-to-let interest rates are still climbing and reached an average of 6.18% in July, while the average UK house price in June was £287,546, according to the latest ONS House Price Index when the average buy-to-let mortgage rate was 5.45%.

As a result, between January and March this year, the value of buy-to-let mortgage lending dropped by 40% to £5.8 billion on the previous quarter while the value of loans granted also dropped by 44%.

The share of homeowner loans granted for buy-to-lets was also just 9.8% of total mortgage lending in Q1, the lowest share since 2011, which suggests that fewer people are looking to invest in the sector, according to Kate Steere (pictured), housing expert at finder.com.

“We’re seeing a trend of landlords pulling out of the buy-to-let market as consecutive base rate hikes have made it unprofitable for them to continue,” says Steere.

“This will have a worrying impact on an already competitive rental market, leaving renters with fewer options and rising costs as they attempt to navigate the cost-of-living crisis.”

Read more about mortgage interest rates.