The Renters' Rights changes every landlord should have modelled by now

The Renters' Rights changes that finally landed have reshaped what a buy-to-let investment actually is. If you are still underwriting BTL on the old Section 21 assumptions, your numbers are wrong, and your lender may know it before you do.

Here is what has changed, what it means for rental yield, and how the lenders are reacting.

Section 21 is gone

Assured shorthold tenancies and the no-fault Section 21 eviction are history. Tenancies are now periodic rolling agreements, and you need a serious ground (rent arrears, serious breach, sale) to regain possession. The practical effect is that void periods and dispute costs are higher, and lenders know it.

What that does to yield

If your gross yield was 6% on paper with 2 void weeks a year, assume 4 to 5 now and re-run the maths. Eviction through the courts now takes longer, and many landlords are holding a bigger contingency fund. Lenders are looking at the net, stress-tested yield, not the headline rent.

How lenders have reacted

Several BTL lenders have tightened the interest coverage ratio (ICR) stress. Where 125% was common, we are seeing 130% to 135% on standard BTL and 140%+ on higher-rate-taxpayer cases and limited company BTL. That means you need more rent to borrow the same amount, or a bigger deposit, or a cheaper rate.

The limited company question

SPV limited company BTL has grown precisely because the interest is fully deductible against rental profit. But the ICR stress on company lending is often higher, and the rates are 0.25% to 0.75% above personal BTL. The tax saving has to be bigger than the extra cost, and that depends on your tax band and whether you reinvest or extract the profit.

Portfolio landlords

If you hold four or more mortgaged properties, most lenders run a portfolio-level affordability assessment across the aggregate rent and debt. One underperforming property can pull the whole portfolio's borrowing. We model the portfolio as a whole before you apply.

What we do

We stress your rent against the lender's current ICR, not last year's, model the yield after realistic voids, and tell you whether the deal still works as a BTL or whether selling and reinvesting beats holding. If incorporation is the right move, we say so, and if it is not, we say that too.