A recent study by Hampton revealed that landlords' spending on mortgage interest has increased by 40% year-on-year. This signifies a growing financial strain for investment landlords.

Statistics show that in August this year, mortgage investors used an average of 37% of their rental income to cover mortgage costs, significantly up from 28% during the same period last year.

Moreover, rental growth rates across the UK hit double digits in September, with the average cost of new rental properties increasing by 11.7% compared to the same period last year.

Mortgage interest is one of the largest costs for landlords, and the pace of interest rate hikes has severely squeezed investors. Even if the Bank of England doesn't raise rates further, it is estimated that landlords' mortgage interest payments will exceed £20 billion in the next two years. This could potentially consume most, if not more than half, of landlords' rental income. For some investors, this will be an unbearable burden, leading them to consider exiting the market, further intensifying the pressure of rising rents.

A decade of cheap funding and continually rising property prices previously encouraged many landlords to convert their properties to mortgages and extract cash from buy-to-let investments.

However, research indicates that much of this funding has not been reinvested into purchasing rental properties but has instead flowed into other areas, such as helping children buy their first homes. With the rise in interest rates, this flow of funds is set to reverse, drawing cash out of the economy and back into the housing market as investors aim to repay debts.

In September, the annual rental growth rate across the UK remained in double digits, and the speed continues to accelerate. This represents the second-fastest growth rate in history, second only to the 12.0% in August. Particularly, rental growth in London is even faster, with the average rental cost in the capital reaching £322 per square meter, a 15.7% increase from the same period last year. This indicates that rental pressure is prevalent nationwide and more pronounced in popular cities like London.

In light of this situation, it is essential for investment landlords to carefully assess risks and returns. Choosing low-cost, high-yield investment opportunities, such as purchasing properties in cities or areas with significant future development potential, is advisable.

Additionally, investors need to consider the quality of the property and the characteristics of the area, avoiding properties in high-risk areas such as bushfire-prone areas, flood zones, or beneath flight paths. Understanding factors such as the availability of infrastructure, local government planning, and development in the target area is also crucial.