I get asked this every week at the moment, usually by someone who bought their first rental property years ago and is now looking at a renewal quote that makes their eyes water. So let me give you a straight answer, and then show you the numbers behind it.
Buy to let still works in 2026, but it has stopped being something you can do casually. The gap between a well bought, well financed rental property and a poorly bought one is far wider than it was five years ago. The market has not closed. It has just stopped forgiving mistakes.
If you are buying on a sensible yield, in a limited company where that suits your tax position, with a lender whose stress test actually fits your rent, the sums can still work. If you are buying a low yielding flat in an expensive part of the country on a small deposit, they probably will not.
There is a lot of noise about landlords leaving the market. The published data tells a more interesting story.
The Office for National Statistics reported on 16 September 2026 that average UK private rents reached £1,400 a month in August, up 3.8% over the year. In England the average was £1,459, up 4.0%. Rent inflation actually picked up slightly compared with the month before.
Worth knowing if you are a Hampshire landlord: the South East recorded 3.0% annual rent inflation, the lowest of any English region. Rents here are rising, just more slowly than in the north.
This is the figure most people get wrong. According to UK Finance data published on 15 July 2026, the average rental yield on new buy to let lending reached 7.21% in the first quarter of 2026, compared with 6.93% a year earlier.
Yields have improved because rents have climbed while house prices have flattened. That is the whole mechanism. It is not a great environment for capital growth, but it is a better one for income than we have had in years.
The same UK Finance figures show 58,272 new buy to let loans advanced in the first quarter of 2026, worth £10.8 billion. That was up 3.26% by number and 7.02% by value on the same quarter a year before. Buy to let possessions ran at 810 in the quarter, unchanged year on year.
Landlords are still buying. The market has thinned out at the amateur end, not disappeared.
The other side of the coin. The ONS put the average UK house price at £273,000 in July 2026, up just 1.4% over the year, with growth slowing for a third consecutive month. Halifax reported on 7 September 2026 that its average price fell 0.4% over the year to £298,468, the first annual fall in its index since November 2023.
So if your plan depends on the property being worth a lot more in three years, that plan currently has no supporting evidence behind it. Buy for the rent, and treat any growth as a bonus.
This is the part that surprises people. There is no single direction of travel in buy to let pricing this month.
In the first half of September, Paragon cut buy to let rates by up to 0.15% and Landbay cut by up to 0.20%, according to Mortgage Solutions. Then on 16 September, the same publication reported that Family Building Society reintroduced its buy to let range with rates 0.60% higher, citing swap rate volatility.
Cuts and rises in the same fortnight, in the same corner of the market. That is what a volatile funding market looks like from the inside, and it is exactly why a single lender's quote tells you very little about what is actually available.
The backdrop matters too. The Bank of England has held Bank Rate at 3.75% since 30 July 2026, yet fixed rates have been climbing, because lenders price fixed deals off swap rates rather than off Bank Rate. Moneyfacts reported on 16 September 2026 that the average five year fixed rate across the market had reached 5.82%, its highest since November 2023.
Most landlords who get declined are not declined on the rate. They are declined on the interest cover ratio, which is the test lenders use to check the rent covers the mortgage with room to spare.
A lender will typically take your expected monthly rent and test it against a notional interest rate, often higher than the rate you are actually paying, and require the rent to cover something like 125% to 145% of that payment depending on your tax position and the product term.
UK Finance reported that the average interest cover ratio on new buy to let lending improved to 221% in the first quarter of 2026, up from 204% a year earlier. That improvement is real, but it reflects the deals that got through. The ones that failed do not appear in the figure.
Two practical consequences. Five year fixed rates usually stress more generously than two year deals, which is why so much landlord business sits on five year products. And a property with a thin yield can pass on paper in one lender's calculator and fail in the next one's, with nothing changing except whose spreadsheet you are in.
Buying an additional residential property currently carries a 5% stamp duty surcharge on top of the standard rates, according to GOV.UK. On a £250,000 purchase that surcharge alone is £12,500 before you get to the standard bands. You can work your own figure through our stamp duty calculator.
Then there is how your rental profit is taxed. Higher rate taxpayers holding property personally cannot deduct mortgage interest from rental income in the way they once could, which is a large part of why so many landlords now look at limited company buy to let instead. I am a mortgage adviser rather than a tax adviser, so the structure decision should always be taken with an accountant who knows your full position. What I can tell you is which lenders will and will not lend to the structure you choose.
Interestingly, Mortgage Solutions reported on 14 September 2026 that new buy to let company incorporations have fallen, with the suggestion that the boom in that structure may have peaked. Incorporating is not automatically the right answer, and it never was.
Take a £200,000 terraced house let at £1,100 a month, which is a realistic shape of deal in parts of Hampshire and much of the Midlands and north.
At an interest only rate of 5%, the mortgage costs £625 a month, leaving £475 a month before letting agent fees, insurance, maintenance, void periods and tax. If the rate moves to 6% at renewal, that mortgage cost becomes £750 and the margin drops to £350. If it moves to 4%, the cost is £500 and the margin is £600.
That is the whole game in one paragraph. A one percentage point move in your rate swings the monthly margin by around a quarter in this example. These are illustrations only, not a quote, and your own figures will differ.
In my experience the deals that work in this market tend to share some features. Higher yielding stock, usually outside the most expensive southern postcodes. A deposit large enough to get the loan to value down and open up better pricing. A five year fix where the stress test is kinder and the next few years are predictable. And an honest maintenance budget rather than an optimistic one.
Houses in multiple occupation typically produce higher yields than a standard single let, which is why experienced landlords keep drifting towards them, though they bring licensing and management demands that are not for everyone.
If you already own a home and want to keep it while you move, let to buy can be a way into being a landlord without buying anything extra, and it sidesteps the surcharge question in some circumstances.
I talk people out of buy to let fairly regularly, and the reasons repeat. A yield under about 5% gives you almost no cushion once the rate moves. A small deposit on a low yielding property often fails the stress test outright. Relying on capital growth over a short horizon is not supported by the current data. And if the rental income is needed to cover a shortfall elsewhere in your finances, the void period risk is simply too concentrated.
There is a good sign on the demand side worth mentioning. Mortgage Solutions reported on 8 September 2026 that rental arrears are at historically low levels, though landlords are reporting more difficulty with vacant periods. Tenants are paying. Filling the gap between tenancies is where the friction now sits.
If you already own rental property and your deal ends within six months, start looking now. Rates have been rising through September and an offer can usually be held for several months, so getting one in place early gives you a floor while you keep watching. If pricing improves before completion we can usually look at switching.
If you are thinking about your first rental property, work the yield before you fall in love with the house. Run the rent against a stress rate a percentage point or two above what is being quoted today, and see whether it still works. If it only works at today's rate, it does not really work.
If you are a higher rate taxpayer, get the structure question answered by an accountant before you offer on anything, not afterwards. Moving a property between personal and company ownership later is expensive.
If your portfolio is spread across several lenders, it is worth having someone look at the whole thing at once. Renewal dates that all land in the same quarter concentrate your risk badly.
We are a whole of market brokerage, which means we look across lenders rather than at one panel, and we can see which stress tests your rent actually passes before an application goes anywhere near an underwriter. If you want a straight opinion on whether a particular deal stacks up, get in touch and we will run the numbers with you. You can also read more about how buy to let mortgages work, or about switching an existing loan on our buy to let remortgage page.
The market average on new lending was 7.21% in the first quarter of 2026 according to UK Finance, though that figure is pulled up by higher yielding regions and property types. As a rough working rule, below 5% gross leaves very little room for a rate rise, and most of the deals I see working comfortably sit above 6%.
It depends entirely on your tax position, how long you intend to hold, and whether you need the income now. Company structures can be more efficient for higher rate taxpayers retaining profit, but they bring running costs, and company buy to let rates are typically a little higher than personal ones. Take advice from an accountant on the tax and from us on the lending.
Not necessarily as a rule, but in practice yes on lower yielding property, because the interest cover test bites at higher loan amounts. Putting more in is often the only way to make a marginal property pass.
Five year fixes usually stress more generously, which can mean you can borrow more, and they remove renewal risk for longer. Two year deals give you the chance to reprice sooner if rates fall. Given how unsettled pricing has been this month, most landlords I speak to are prioritising certainty, but it is a genuine judgement call rather than a right answer.
Most buy to let mortgages are not regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments on your mortgage. The figures in this article are illustrations based on the sources named and are not a quote or a recommendation. Rates, criteria and tax rules change, and advice should be based on your own circumstances.
