Foundation Home Loans has reported that average rental yields have reached a 10-year high of 6.3% while robust tenant demand – which 82% of landlords describe as strong – is presenting significant opportunities for mortgage advisers to assist their clients in leveraging these positive trends.

That is the view of landlords from the Q2 2024 Landlord Trends report, conducted by Pegasus Insight on behalf of Foundation Home Loans, and comprised of 799 online interviews undertaken between June and July this year.

60% of landlords borrow to fund their portfolios, holding an average of 5.3 loans, which increases to 14.4 loans for those with over 11 properties in their portfolio. Over one-third plan to remortgage or undertake a product transfer in the next 12 months with landlords anticipating they will refinance 2.5 products on average; of those who will be refinancing, 38% have one mortgage to refinance, 34% two, 12% three, 8% four, and 7% have over five mortgages due for maturity in this timescale.

Landlord borrowers owe, on average, £665k in total, equating to around £125k per buy-to-let mortgage. Total borrowing ranges between £268k for non-portfolio landlords – those with one to three buy-to-let mortgages – and £1.16m for portfolio landlords. One in five landlords owe more than £1m.

Foundation said the level of mortgages coming up for remortgage, and the average amounts being owed, presented a sizeable opportunity for mortgage advisers to offer competitive refinancing solutions and to earn strong levels of procuration fees from those remortgages.

There were a number of other notable trends to come out of this iteration of the Landlord Trends report. One was the continued increased preference for limited company ownership among landlords, especially for new purchases, with 67% of new acquisitions now held within a company structure.

Of the 10% of landlords who said they intend to increase the size of their portfolio over the next 12 months – with multiple options available to them – 67% said they plan to use a buy-to-let mortgage, 29% to purchase outright, 31% will release equity from existing properties, 10% will borrow using a commercial loan and 5% will use funds drawn from a pension pot.

The incidence of rental increases has tripled in the last four years, with 74% of landlords raising rents in Q2 2024. This trend is driven by increasing portfolio management expenses and rising mortgage finance costs.

The Landlord Trends report also looked at rent controls within the private rental sector and their potential impact on landlords.

Rent controls and legislative changes, such as the removal of Section 21 (no fault evictions), are high on the agenda for landlords. 55% said rent controls would greatly impact their commitment to renting, and one in three would consider selling their properties if controls were introduced.

According to the report, landlords are less worried about other potential regulatory changes, such as outlawing bans on specific tenant types, compulsory licensing, or abolishing fixed-term contracts in favour of rolling contracts.

Grant Hendry, director of Sales at Foundation Home Loans, said: “Despite a challenging market environment, landlords are finding ways to maintain profitability and expand their portfolios. Average rental yields increasing, the ongoing preference for limited company ownership and high tenant demand are all encouraging trends which keep on emerging and should provide mortgage advisers with opportunity to secure business and help landlords navigate the market.

“There is clearly a significant remortgage market to target in the months and weeks ahead, with a number of the landlords surveyed outlining how they had multiple mortgages coming to an end which will need refinancing.

“In an interest rate environment which has seen some falls already, we believe the opportunity to remortgage is now greater than in the last couple of years, and we’ll see a growing cohort of landlord borrowers able to remortgage to a different lender rather than simply have to accept a product transfer.

“Again, this presents a strong opportunity as it doesn’t just bring the remortgage into ‘play’ but clearly the opportunity to talk to existing landlord borrowers about any other product/service wants and needs they might have.

“The cost of financing properties and portfolios, even with higher yield and strong tenant demand, continues to sit heavily with landlords and is impacting their views on whether now is the time to add to portfolios. It is to be hoped the new government is committed to increasing supply in the PRS, as it certainly requires more housing in order to meet the tenant demand that is so clearly there.

“As the market evolves, we would urge advisers to stay informed about regulatory changes such as potential rent controls and the removal of Section 21.

“By providing expert advice and comprehensive mortgage solutions, advisers can help landlords navigate these challenges and capitalise on opportunities, ensuring the continued growth and profitability of their portfolios.”