Morningstar DBRS Review: BTL Market Indicators Show Margin Pressure Amid Rent Gains
What happened
Morningstar DBRS reviewed average private rent data from the Office for National Statistics and used metrics from UK Finance to assess the Buy-to-Let (BTL) mortgage market. The research found that average private rent rose to 3.7% in July, compared to average BTL mortgage costs of 2.8% for the same period. Furthermore, the average Interest Cover Ratio (ICR) increased to 221% in Q1, up from 204% the previous year. The report noted that the market was still contracting, driven by refinancing rather than new purchases.
Why it matters
The study indicated that factors such as the removal of tax relief, rising landlord costs, regulatory changes, and increasing financing costs had eroded landlord margins. While loans in 30 or more days of arrears fell to 2.9%, the overall market size remains under pressure.
Who's involved
- Morningstar DBRSConducted the financial review of the BTL mortgage market.
- UK FinanceProvided financial metrics used in the research.
- Office for National StatisticsProvided average private rent data utilized by Morningstar DBRS.
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The entities involved
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Morningstar DBRS
financial services
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UK Finance
UK trade association
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Office for National Statistics
United Kingdom's principal government institution in charge of statistics and census data