Landlords are increasingly purchasing cheaper properties with higher yields, Mortgages for Business found in its Complex Buy to Let Index research.
An analysis of mortgages arranged via the lender in Q2 found that all types of buy-to-let properties purchased during the quarter had lower values than usual.
Those lower-value properties are providing betters returns, with both HMO and multi-unit purchases achieving average yields of over 10%.
Steve Olejnik, chief operating officer of Mortgages for Business, said: “Landlords have been selective with their purchases this quarter, choosing properties that maximise their income with minimal investment.
“This strategy is likely to remain common as it allows landlords to maintain profitability while HMRC phases in restrictions on income tax relief for landlords.”
Landlords have had to scale back their rate of expansion from last quarter, with Q2 seeing a drop in the proportion of buy-to-let purchase transactions compared to Q1.
Only semi-commercial properties saw an increase in purchase activity, with purchases now making up 67% of quarterly mortgage transactions for this property type.