*This article was updated in November 2023 following the base rate decision. Some information may no longer be current.
For many years, buy-to-let investments have been a staple of the UK property market, providing a reliable source of income and potential capital growth for landlords. However, the market landscape has changed significantly over the past decade, with new regulations, tax changes, and economic uncertainties leaving many wondering if buy-to-let is still a worthwhile investment.
What’s the buy-to-let market like right now?
In light of the mini budget, cost-of-living crisis, and 14 consecutive base rate rises, it’s no surprise that buy-to-let mortgage rates are much higher than they were this time last year. While the Bank of England has decided to hold off from more consecutive hikes for the time being, there is still a possibility that future increases are yet to come. What’s more, any drops in mortgage rates are likely to be minimal, so current and prospective landlords will be feeling the squeeze on their finances either way.
Although the current state of the market leaves much still unknown, there are still plenty of reasons why you should invest in buy-to-let property. With many first time buyers finding it hard to raise the deposit to get on the property ladder, rented accommodation is one of the first choices in comparison to buying.
With this in mind, the demand for rental properties remains strong, especially in urban areas, ensuring a consistent stream of tenants. Moreover, with good property management and due diligence, buy-to-let investments can provide long-term financial security and a valuable source of passive income.
Are you looking for a long or short-term buy-to-let investment?
Whether you're eyeing a long-term commitment or a short-term venture, the buy-to-let market offers plenty of opportunities to align with your financial goals. To make your money work for you, planning ahead is essential.
Long-term investments can provide stability, capital appreciation, and the potential for consistent rental income. Therefore, if you can afford to lock away your funds for the long haul, the potential for substantial returns can be a great option - especially if property prices are working in your favour.
On the other hand, as your money is tied up in your buy-to-let property, this may present some challenges if you can’t sell up in a set period of time and you need the funds. What’s more, given the ever-fluctuating nature of the buy-to-let market, you should also be mindful of the potential to lose money, as property prices may go down.
Understanding your local market
Planning is everything when it comes to investing in property, so taking the time to brush up on your local knowledge is invaluable - particularly as the rental market for each region will differ to the next.
To help you decide where to buy, get to know what the demand is like in your area by speaking to other landlords/estate agents, and reading online forums. You might realise that buying a little further afield from where you originally planned is worth it if the rental market is thriving in this area.
Once you’ve decided where to buy, the next job is finding the right property. Many first time landlords make the mistake of buying a property that they can see themselves living in. However, this is often the wrong approach if you’re planning on buying purely for investment purposes.
Is buy-to-let a good investment?
In light of the current economic climate, it’s of no surprise that mortgage customers have been hit badly, especially those with a buy-to-let mortgage. What’s more, rising costs for landlords are likely to be passed on to tenants, making it a more challenging environment all round. While the current outlook may seem gloomy for landlords and property investors, the fundamentals underpinning the buy-to-let market for investors remain robust, and as with previous financial storms we as a nation have had to weather, this too shall pass.
With this in mind, is investing in buy-to-let still worth it? Outside of current market conditions the answer ultimately depends on your individual circumstances and risk tolerance. It's essential to carefully assess the potential returns, taking into account all the associated costs and risks. As with any investment, thorough research and consideration of your financial goals and circumstances are essential before entering the buy-to-let market - and that’s where a mortgage adviser comes in.
Get the right mortgage advice
If you’re thinking about becoming a landlord, we recommend you sit down with a mortgage adviser beforehand to talk everything through and ensure you are making the most suitable decision for your finances.
Working together, you can run through your finances, the type of property you want to buy (whether it’s a semi-detached property, flat, or HMO), the types of tenants you want to attract, and the rental returns that could be generated. A mortgage adviser’s knowledge and expertise of the buy-to-let market means that they are perfectly placed to help find the right mortgage for your circumstances.
When making your decision, remember the purpose of letting out property is not solely to make money - you also have a responsibility to provide safe and secure housing to your tenants. Our buy-to-let guide can help you prepare for the roles and responsibilities of being a landlord, so be sure to give it a read if this is something you’re seriously considering.
Meanwhile, if you have any further questions about your buy-to-let mortgage please don’t hesitate to get in touch with our team of expert advisers.
Want to find out how much you could afford on a buy-to-let property before speaking to us? Check out our buy-to-let mortgage calculator.
There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.