The current higher interest rate environment and the temporary mortgage product withdrawals after the mini Budget will hurt future rental yields, it’s been claimed.

“It’s an obvious point to make that the cost of buy-to-let mortgages has increased, and landlords will need to factor that into their profitability and what they might charge for rent in order to cover these increased costs” says Steve Cox, chief commercial officer at Fleet Mortgages.

He continues: “This is not an easy task given the cost of living crisis and there is a need to marry up the need of the landlord to cover the mortgage, with the struggles being faced by many tenants.”

He says the harsher environment means that even those landlords who want to expand their portfolios are now unlikely to do so on grounds of cost; some others, he feels, want to quit the sector completely.

“Our outlook is that rates will remain high for the short term although it is our hope that recent attempts to calm the markets will provide greater certainty to lenders who will be able to return products to market, particularly in areas such as two-year fixed rates which have, by necessity, seen a considerable fall in number” Cox adds.

Fleet’s buy to let Rental Barometer shows that annual yields have dropped in eight out of 10 regions – another reason why more landlords are expected to exit the sector over the next few months.

The research shows that yields have typically dropped on average by 0.8 per cent year-on-year, from 6.2 to 5.4 per cent.