Since the end of 2022, UK buy-to-let (‘BTL’) mortgage approvals rates have experienced a sharp contraction with the number of new BTL loans more than halving between mid-2022 and the end of 2024.
The sector had witnessed some respite following a period of market stabilisation aided by consecutive interest rate reductions over 2024/25 however this has been short-lived owing to rising geopolitical impacts on the wider UK economy. Interest rates have been held throughout 2026 and are now poised to rise later in the year amid increasing inflationary pressures.
The climate remains very challenging and landlord demand for BTL property remains comparatively subdued as increasing numbers look to auctions as a means to exit the market quickly – often without success or else taking a ‘hit’ on value.
The Renters’ Rights Act
The Renters’ Rights Act is the product of a manifesto pledge by the Labour Government to ‘transform the experience of private renting’ in the UK.
The Government’s principal aims are to give tenants much greater security and stability so they can stay in their homes for longer, put down strong roots in their communities and avoid the risk of homelessness.
All this whilst also seeking to improve the quality of the UK housing stock. According to the Organisation for Economic Co-operation and Development (OECD), the UK has the oldest housing stock in Europe with almost 40% of homes having been built before 1946 and 20% before 1919.
With an estimated 11 million private renters and 2.3 million landlords in England, the impacts of the Act on private landlords (and their lenders) will be far-reaching.
The key changes brought about by the Act include:-
- abolishing “no-fault” Section 21 evictions meaning landlords must use a Section 8 notice and have a specific and valid reason to end a tenancy agreement e.g. acts of anti-social behaviour, damage to the property or significant arrears. The requisite notice period for landlords obtaining possession in many cases will increase from 2 months to 4. There are some exceptions to this rule including where there are rent arrears of 3 months or more, or following the death of a tenant. Tenants will; be required to give a minimum 2 months’ notice to end a tenancy (previously 4 weeks) unless the tenancy agreement explicitly allows for a shorter period.
- Assured Shorthold Tenancies (ASTs) are abolished and are replaced by Periodic Tenancies – rolling, open-ended tenancies with no fixed term. This, the Government says, is to increase flexibility to tenants in response to changing circumstances e.g. after a relationship breakdown, taking up a new job or when buying a first home.
- limiting rent increases to once per year using a section 13 notice (Housing Act 1988). The Act seeks to also outlaw unfair practices of ‘backdoor evictions’ in which rent increases must reflect local market rents and not be excessive or punitive. Tenants are able to challenge proposed rent increases via the First-tier Tribunal (Property Chamber).
- banning rental bidding wars. Landlords and agents will be required to publish an asking rent for their property and it will be unlawful to accept offers above this.
- removing the ability of landlords to demand large amounts of rent in advance which is seen as unfair and places unnecessary financial pressure on tenants. Rent advance payments will typically be limited to the equivalent of one month however larger upfront payments are still possible under the new rules – tenants may choose to offer a larger advance (e.g. to strengthen an application) but a landlord cannot demand
- widening the scope of the Decent Homes Standard which already existed for the UK social housing sector but will bring the private rented sector in scope. Landlords will be compelled to maintain their properties in a reasonable state of repair with modern facilities and services. Local Councils will enforce the standards and landlords who fail to comply will be liable for Court action.
- making it illegal to discriminate against tenants with children, or imposing blanket bans on pets.
When does the Act come into effect?
The Renters’ Rights Act received Royal Assent in April this year and the new rules are effective from 1 May 2026.
The Impact on Landlords
The changes being introduced are purposefully designed to be very tenant-friendly. Landlords need to familiarise and prepare themselves with the changes without delay to ensure they are not in breach. Non-compliance, whilst not automatically a criminal offence, can lead to criminal prosecution for serious or repeated violations in addition to other penalties like fines and court-ordered repairs.
Whilst the intentions of the Act are well-meaning, we expect there will be unintended consequences as the market responds to the changes. Data produced by The Mortgage Works in the Summer 2025 showed that the number of year-on-year residential buy-to-let investment transactions in the UK fell by almost 44%.The 2026 statistics are yet to be published but regulatory reforms and economic uncertainty is expected to compound serviceability issues in the market further.
Some of this contraction in the market can be attributed to a 5% Stamp Duty surcharge imposed on purchases by landlords which came into effect on 1 April 2025; however weakening investor confidence brought about by uncertainty around the emergence of Renters’ Rights Act has also deepened and as Landlords come to terms with the practical implications of the changes.
The Impact for Lenders
BTL assets, traditionally the fodder of property auctions up and down the country, have become less liquid as a result of both fiscal and monetary policies, and regulatory reform. The inactivity (or complete withdrawal) of many would-be-investors from the market has been particularly pronounced in areas where yields have typically been lower. Softening yields brought about by weakening investor confidence and rising uncertainty is placing downward pressure on pricing and causing values to fall. This has been compounded by the increase in cost of borrowing over the past few years.
At Watling Real Estate we are seeing increasing levels of distress in the residential BTL sector, in all regions and across all housing types. Simply put, residential BTL investments are no longer the ‘cash cows’ they once were. The threat to cashflow and property values over the medium term is an issue for many landlords, many who have underinvested in their portfolios over a prolonged period. With limited opportunities to grow rental income in secondary/tertiary housing stock in the short to medium term, answers to the conundrum of how housing improvements will be funded remain as elusive as ever.
From a Lender perspective, the landscape is fast-changing and keeping pace of market shifts is crucial – valuations are soon becoming outdated as new evidence comes to light. Pro-active engagement with Customers is essential for preserving and optimising value.
If you are a Lender with clients who may need some support in navigating the changes, or have concerns about how the Act will impact directly upon your security, please reach out to a member of the Watling team and we will be pleased to assist.
