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As the nation’s capital and most populated city, London is an obvious place to consider for a buy-to-let investment, but it’s vital to do your homework before you apply for a mortgage. Here you will learn about its rental yields, where the most lucrative postcodes are and how to get a buy-to-let mortgage there.
Is London a good place to get a buy-to-let mortgage?
London is a popular area among buy-to-let landlords, but the rental yields in the capital are currently below the UK average. The latest figures from Zoopla suggest that average gross rental yields in the city are 4.95%, but some postcodes offer 6% plus.
House prices are another factor to take into account if you are considered a buy-to-let mortgage in London and, at the time of writing (December 2024), they are currently £520,000, way above the national average. This, however, means that typical rent payments are much higher too.
Although house prices can be high and rental yields in some postcodes relatively low, parts of London can be hugely lucrative for buy-to-let mortgage holders.
Here are some of the reasons to consider the city for your property investment:
- High demand for rental accommodation: Some parts of the city are the most in demand in the county. According to a study by Simply Business, the Redbridge area of East London has the most tenant enquiries in the country (49 per property).
- Growth forecast: Data from Savills indicates that London will see the biggest growth in rental prices in England, making it potentially lucrative for savvy landlords.
- A massive student population: London is currently home to over half a million students, many of whom are in need of rental accommodation. This, in turn, means there are a high number of graduates seeking housing there each year too.
What size mortgage will you need?
The answer to this question obviously varies depending on a host of variables, such as the property size and the area you’re buying in, but we can give you a rough idea based on average house prices in London. Based on the current average of £520,000, you would need a deposit of at least £104,000 (20%) to get a mortgage of £416,000
Best areas to get a buy-to-let mortgage in
Based on average rental yields, the best London areas to get a buy-to-let mortgage are the IG11 and SE28 postcodes, both of which have yields of around 6%. The table below shows the relevant data for 10 of the top postcodes in the city:
|
Postcode |
Average Rental Yield |
Average Property Price |
|
IG11 |
6.3% |
£324,777 |
|
N17 |
6.0% |
£423,967 |
|
RM10 |
6.0% |
£377,214 |
|
SE28 |
6.0% |
£356,438 |
|
UB7 |
5.4% |
£378,358 |
|
DA1 |
5.5% |
£365,058 |
|
SE25 |
5.2% |
£362,056 |
|
E3 |
5.9% |
£429,969 |
|
E6 |
5.8% |
£411,214 |
|
E16 |
5.7% |
£448,218 |
Source: PropertyData
How to get a buy-to-let mortgage in London
Now that you have done some research into locations for your London buy-to-let mortgage, your next step should be to compare the rates and deals available to you. You can do this on Teito for free, choose one you like in real time and apply for an agreement in principle.
When you source a mortgage with us, you will be offered a free, no-obligation chat with a broker who specialises in London buy-to-let mortgages - get started below:
Find a better buy-to-let mortgage on Teito
Popular property types
Houses are among the most popular property types among London buy-to-let landlords, with the city being the most popular in the UK for terraced and semi-detached properties. Furthermore, London is also leading the way for flats and maisonettes, according to research by Simply Business, but did not make the top three for bungalows.
The figures also reveal the top five locations for houses of multiple occupancy (HMOs), and London was again the hotspot, followed by Birmingham, Bristol, Manchester and Cardiff.
Is London a good location for portfolio landlords?
London is the most popular location in the UK among portfolio landlords, according to Simply Business’ figures, ahead of Manchester, Birmingham, Nottingham and Liverpool. This is unsurprising given that portfolio landlords tend to target the largest cities in the UK.
You can read more about mortgages for portfolio landlords in our standalone guide.
Why choose Teito for your buy-to-let mortgage?
Now that you have researched potential locations, you can use our free service to compare rates and access support from a broker who specialises in London buy-to-let mortgages.
Here are just some of the reasons landlords choose to source their mortgage through us:
- You can access buy-to-let rates in seconds
- Our brokers specialise in the London buy-to-let market
- We are 5-star rated on leading review websites
- You can secure an agreement in principle in minutes
Ready to source a mortgage and take advantage of a free, no-obligation chat with a broker who specialises in London buy-to-let mortgages? Get started here.
FAQs
Every buy-to-let mortgage lender in the UK will at least consider offering finance to landlords who are investing in London. In other words, none of them will turn you down outright purely because the property you are buying is in, or near, the London area.
However, some lenders might be better equipped to handle your application than others. For example, London is known for having some of the highest property prices in the UK, so if the mortgage you need is large, some mortgage providers’ borrowing caps might hinder you.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.