Professional landlords are driving a sharp shift towards specialist buy-to-let borrowing and more diversified portfolios as profitability across the sector reaches its highest level in six years, according to new Q3 data from Foundation Home Loans.
The lender’s latest Landlord Trends research, conducted by Pegasus Insight, shows that one in 10 landlords now holds a specialist buy-to-let product such as an HMO, semi-commercial or non-standard property loan.
A further one in seven expects to take out a specialist loan within the next year. Among larger operators with more than 20 properties, the proportion already using specialist finance rises to more than a fifth.
Demand is especially strong among portfolio and limited-company landlords, with rates, fees and speed of decision-making cited as the most important factors when selecting a lender. Foundation said the findings reflect the continued professionalisation of the landlord base and a growing need for tailored, broker-led lending solutions.
LIMITED COMPANY BOOM
The trend is reinforced by the continued shift towards incorporation. Just over one in five (22%) landlords now hold at least one property within a limited company, with 70% of those portfolios fully incorporated.
Among those planning to buy in the next 12 months, three-quarters intend to do so through a limited company – the highest level yet recorded. Foundation said most of this activity relates to new acquisitions rather than transferring existing stock, underlining its strategic focus.
“Some 89% of landlords reported a profit, with only 4% loss-making.”
Profitability across the sector remains strong. Some 89% of landlords reported a profit, with only 4% loss-making.
Average rental yields have risen to 6.6%, surpassing the previous 10-year high, while the typical landlord portfolio now stands at £1.77m and generates £79,000 in gross annual income.
The research points to a sustained refinancing cycle, with 39% of landlords intending to remortgage or complete a product transfer over the next year.
Portfolio landlords expect to refinance around 2.5 loans each, while a rising proportion – up 10 percentage points to 33% – plan to release equity to fund further purchases.
Landlords also remain wary of the regulatory backdrop following the Renters’ Rights Bill receiving Royal Assent in October.
Nearly three-quarters expect a negative impact and 81% say they will become more selective over tenants. Even so, half expect to remain profitable, and 44% believe the legislation will help drive further professionalisation across the sector.
SOPHISTICATED MARKET
Grant Hendry, Director of Sales at Foundation Home Loans, says: “The latest data shows a market evolving rapidly towards greater sophistication.
“For instance, specialist buy to let requirements means one in seven landlords now plan to use a specialist loan in the coming year, and this trend is strongest among those already operating through limited companies.
“It reflects a sector that is thinking strategically about portfolio diversification, long-term value and the type of products they are going to require going forward.
“We’re also seeing record levels of profitability and yields, which demonstrates the strength and adaptability of professional landlords.
“These investors are more financially structured and increasingly reliant on brokers and specialist lenders to help them manage complex portfolios efficiently.
“With the Renters’ Rights Bill now enacted, landlords are facing another period of adjustment, but the majority remain confident in their ability to operate successfully. Brokers have a vital role in helping them navigate this new landscape and ensure their lending and property strategies remain aligned with the opportunities ahead.”
