Shawbrook Bank says its latest research shows that almost half of landlords in the UK are taking a cautious approach, despite confidence in the buy-to-let market remaining.

The bank’s latest ‘BTL Barometer’ found that landlords are taking a “wait and see” approach when it comes to the buy-to-let market, to reflect on recent governmental and regulatory changes and to assess how the market adapts to Brexit uncertainty before making further purchases.

The annual survey reveals the biggest challenges facing investors over the next six months, with landlords citing regulation (22%), interest rate movements (21%) and lending restrictions (16%).

When it comes to regulatory challenges, the change that has most affected landlords is the reduction on the tax relief for buy-to-let mortgages, with over half of landlords (52%) saying this had the biggest impact. This has increased from last year’s results where 35% said this had affected them most. Landlords say the 3% extra stamp duty levy was the second biggest regulatory change that has had an impact, with 21% feeling the effect of this.

To counteract the changes, some landlords are looking for ways to protect their portfolios. 33% of landlords have already, or are planning to, set up a limited company whilst 18% intend to re-mortgage and 19% are looking to sell their property/properties. In comparison, to prevent the impact of the regulatory changes, 49% of landlords say they are going to wait and see what happens over the next 6-12 months before they put any measures into place.

Karen Bennett, managing director of Shawbrook Bank Commercial Mortgages, said: “Stricter affordability tests for portfolio landlords and interest rate rises will make it harder for some to get funding and this month will also see the next phase of reductions in tax relief for buy-to-let, further hitting landlords’ profits.

“It is encouraging to see professional landlords adapting their strategy in line with regulatory change, thereby helping to ensure the long-term sustainability of the industry.

“We have seen a slight cooling as landlords evaluate their options, not rushing into purchases and holding existing property. It is important to recognise however, that buy-to-let remains a crucial component in the wider UK housing landscape, and data suggests that although investors may tread carefully throughout 2018, they retain confidence in the fundamentals of this market.”