Jeni recaps a transitional year for landlords, falling mortgage costs, record rental yields, shifting tenant demand, and confidence trends, plus much more. Discover what’s next for 2026 and beyond.
First and foremost, I hope you are well and that 2025 has been kind to you.
As is somewhat of a tradition, I wanted to write to you and share some thoughts about what we have seen in the last 12 months, and where we think things will go over the next 2-3 years.
If I were to summarise 2025 as a landlord, I would use the word transitional. This year, we’ve been on a downward trajectory in mortgage costs, and we've spent most of our time waiting for the Renters’ Rights Act (RRA) and the Autumn Statement. Thankfully, we end this year with the latter two reaching some kind of clarity (more on this to follow), but it’s not a clean finish.
Rates are likely to continue decreasing, albeit, at a slower pace, in 2026. The granularity and the ‘how it works in the real world’ element of the RRA will only become clear once it takes place in May 2025, and let’s not forget we have the MEES changes to be thinking about to boot.
One thing is for sure: things never stand still in the PRS. Yet landlords continue to amaze me with their resilience and agility when it comes to positively managing change, most notably demonstrated by the large number of landlords we work with who are continuing to grow their portfolios and see the future as bright.
Before we leave 2025 behind us, I have compiled some useful insights into our sector, which I hope you will find helpful. For landlords getting ready to gear up for the new year, this is an essential read to help you plan ahead.
Average rental yields
Average rental yields across the UK are now at their highest since 2011, at a staggering 7.11%, with a 0.4% increase from last year.
This increase in yields is largely due to a strong growth in rents driven by high tenant demand and lower rental stock, as well as the slow rise in house prices.
On a regional basis, the following table highlights where to focus your future investments to access the most generous rental yields available:
| Region | Average Rental Yield |
| Wales | 8.40% |
| North / North East | 7.90% |
| Scotland | 7.60% |
| North West | 6.80% |
| Yorkshire & The Humber | 6.50% |
| West Midlands | 6.20% |
| East Midlands | 6.00% |
| South West | 5.60% |
| South East / East of England | 5.5-5.6% |
| Greater London | 5.7-5.8% |
Source: Paragon Bank and Zoopla
House prices
According to Halifax, the current average house price in the UK is £299,862, a 1.9% increase year-on-year.
However, regional differences persist, with some areas experiencing rapid growth while others stagnate.
| Region | Approx. House Price Growth |
| Northern Ireland | 8.90% |
| Scotland | 3.70% |
| North West (England) | 3.20% |
| North East (England) | 2.90% |
| Wales | 1.90% |
| South East (England) | -0.30% |
| London & Greater London | -1.00% |
Source: Halifax House Price Index
Notably, the South of the UK has experienced little or no growth. Here, the housing market is particularly challenged over mortgage affordability linked to lending regulations and higher mortgage costs. However, both of these have improved over the year, and therefore, we expect these regions to move into growth through 2026.
Tenant Demand
Whilst demand for rental properties continues to outstrip supply, the balance is beginning to shift. Zoopla’s latest rental market report reveals that demand has fallen by a fifth in the last year, with supply on the rise and 15% more homes for rent than this time last year.
Zoopla explains that this drop in rental demand is due to two key factors. The first is the large decline in net migration. With fewer people moving to the UK to work or study, the drop in migration is directly impacting the level of demand for rental properties.
Secondly, improved affordability for first-time buyers means more renters are taking their first steps on the property ladder. The UK is on track to see more than 350,000 people buy their first home in 2025, and as many of these buyers were previously renters, this accounts for the 15% increase in supply.
However, this is not all bad news. A drop in demand does not mean fewer tenants are looking to rent, or that rent will become less profitable. As we’ve already seen, average rental yields are at a staggering 7.11%. If anything, rising rents have meant many tenants have stayed in rental properties for longer. With more properties on the market, we may see this trend change and a rise in the number of tenants looking to move.
Landlord profiles
The latest Buy to Let Market Barometer by The Mortgage Works (Q3 2025) highlights how landlords feel about their portfolios, their plans, and gives us more insight into market activity.
Landlord confidence
Landlord confidence has remained fairly consistent year-on-year:
- 35% of landlords feel ‘good’ or ‘very good’ about their own letting business (up from 32% in Q3 2024)
- 34% of landlords feel ‘good’ or ‘very good’ about their rental yields (down from 36% in Q3 2024)
- 14% of landlords feel ‘good’ or ‘very good’ about capital gains (unchanged from Q3 2024)
Landlord plans
- 7% of landlords intend to buy in the next 12 months
- 40% of landlords intend to sell in the next 12 months
This is a stark contrast, but it’s not what it may seem. While some landlords are selling up to retire, many are selling off lower-yielding and low EPC assets to make room for a more profitable portfolio (more on this later).
Of those planning to purchase:
- 46% plan to use a buy to let mortgage to finance the purchase
- 75% plan to purchase in a Limited Company structure
Landlord income
The report indicates that the average annual gross rental income for landlords is £79,000, equivalent to £6,583 per month in income per property.
Limited Company landlords earn significantly more, with an annual gross rental income of around £157,000.
Mortgage rates and lending update
Mortgage rates have been on a gentle downward trend throughout 2025, offering some relief after the sharp increases of previous years. The average buy to let rate now sits between 4.5-5%*. This is a modest reduction from the rates we saw last year, but it signals a stabilising market and a return to more predictable lending conditions.
Purchase lending remains robust at £10 billion, matching 2024 levels and exceeding 2023 numbers, returning us to pre-Covid norms. This resilience underscores an important trend: while some landlords are leaving the market, many are reinvesting, often selling lower-yielding assets to optimise their portfolios rather than exiting entirely. In fact, a considerable proportion of buyers are doing so via Limited Company structures, reflecting the rising demand for tax-efficient strategies.
Despite the noise around landlords leaving the sector, the data shows that confidence remains, and opportunities are still being seized.
*Rates as at December 2025, speak to an expert to find out what rates are available to you.
Tackling legislation and policy changes
Renters’ Rights Act
After years of waiting, the RRA has finally received Royal Assent, and the first phase of implementation will begin on the 1st May 2026. The key changes include:
- The abolishment of Section 21 evictions
- Extension of Section 8 grounds for possession
- Allowing tenants to keep pets in properties
- Periodic tenancies
- Strengthened tenant rights
- An online database for landlords
- A new Property Ombudsman
My key piece of advice for landlords now is to stay up to date. Fully understanding what each of the changes means for you and your property business will help you stay ahead. It’s also essential to know when we can expect each of these measures to be phased in.
For more information on each of these changes and the implementation timelines, click here.
Autumn Statement
Many had feared the Autumn Statement would be dire for landlords, especially given Rachel Reeves' announcement of a Stamp Duty surcharge last year. The key challenges for landlords will be the 2% increase in tax on rent and the new “high value council tax surcharge”.
Both measures mean landlords face increased tax bills in 2026. Consequently, we expect to see many property investors explore the benefits of Incorporation.
EPCs
The deadline for properties to have a minimum EPC rating of C or above is no longer just looming; in fact, it’s right around the corner. As a reminder:
- All new tenancies must have an EPC rating of C or above by 2028
- All tenancies (existing and new) must have an EPC rating of C or above by 2030
The consequence of not meeting these deadlines? An unlettable and unmortgageable property. Although these deadlines are still not set in stone, I strongly urge all landlords to review your property’s EPC rating in 2026 and, if you haven’t already, start planning how you’ll make the necessary improvements. We haven’t yet gained real insight into grants or exemptions at this stage, which is frustrating, but staying one step ahead will help protect your rental profits and your portfolio.
There are a number of different funding options available to help you get started. Read our guide to financing your EPC improvements here.
Landlord trends in 2026
Despite the headwinds coming, 2026 will also herald in plenty of opportunities to explore, such as:
- Incorporation
While expensive, Incorporation can offer many landlords tax benefits that can boost portfolio profits. As we’ve seen, more landlords are opting for a Limited Company structure and earning more this way. Furthermore, it’s likely that we’ll see a rise in Incorporation enquiries to help landlords mitigate the extra costs announced in the recent Budget. Do seek advice from a qualified tax advisor.
- Semi-commercial properties
With dual income streams, semi-commercial properties offer landlords a great opportunity not only to diversify their portfolio, but to boost rental income.
- Corporate lettings
Given the challenges landlords have faced over the last few years, it’s no surprise that there’s a rise in popularity for corporate lettings agreements. The security of guaranteed rent for a set number of years is more attractive than ever for landlords.
- Refurbishment projects
With the potential for a significant return on investment, refurb-to-let projects are expected to remain popular in 2026. This will see many landlords head to auction to find a great deal and flip the property at a good profit, thereby boosting their cash flow in the new year.
Getting ready for the new year
As we look ahead to 2026, the outlook for landlords is cautiously optimistic. Industry forecasts suggest:
- Rental growth: UK rents are expected to rise by 2–2.5% annually over the next three years
- House prices: Predicted to increase by 3–3.5% per year
- Tenant demand: While the balance between supply and demand is shifting, demand is expected to remain strong
- Base Rate: Anticipated to settle between 3–3.5% by the end of 2026, which could mean further reductions in fixed mortgage rates, though much of this is already priced in
What does this mean for landlords?
The new year is your opportunity to get ahead. Now is the perfect time to refresh your portfolio strategy, whether that’s exploring Incorporation, preparing for EPC upgrades, or identifying high-yield regions for investment. By acting now, you’ll not only stay ahead of regulatory changes but position yourself to maximise returns and take advantage of the opportunities 2026 has to offer.
Next Steps
As always, if you have any questions or need tailored advice, please don’t hesitate to get in touch. Wishing you a wonderful Christmas and a successful 2026!
call our experts on 0345 345 6788 or submit an enquiry here to see how we can help.
