A property investor taking out the average buy-to-let mortgage is earning £4,000 less a year per property compared to 2020, analysis from personal finance site Finder has found.

This is largely due to high interest rates and house prices.

If a landlord had taken out a 2-year fixed-rate buy-to-let mortgage (75% LTV) for the average property worth £230,318 in April 2020, they would have had an average monthly return of £776 from rental income after paying the interest. This would total £9,309 over a year, assuming occupancy every month.

However, if they’d taken out the same mortgage in April 2024 on the average property worth £281,373, they would get 45% less in average monthly returns at just £424. This totals £5,087 over a year, a dramatic drop of £4,221 in rental income per property.

The average 2-year buy-to-let mortgage to 75% LTV currently has a rate of 4.73%.

Liz Edwards, money expert at Finder, said: “The buy-to-let market has been stagnating over the past couple of years as rising interest rates have made it less profitable for landlords. We are now seeing the worrying effects this is having on an already competitive rental market, leaving renters with fewer options and pushing prices higher and higher.

“Record high UK rent inflation of 9.2% was seen in March this year and, while this is slowly beginning to ease, it remains worryingly high. This new government needs to tackle the rental crisis head-on as rents continue to climb and the number of available rental properties remains well below what is needed to meet demand.”

The value of buy-to-let lending has dropped over the last 2 years, going from £9.7 billion in the last quarter of 2022 to £4.3 billion in the first quarter of 2024.