Buy-to-let activity is shifting across the country as landlords increasingly look to the North and Midlands for stronger yields, lower entry prices and affordability in today’s high-rate environment. While mortgage costs remain elevated, rental demand is strong and regional trends now shape where investors can achieve sustainable returns. In several cities, this shift is also being supported by regeneration projects, population growth among young professionals and improved transport links, all of which strengthen rental resilience and long-term investment potential across key northern hotspots.
This article explores some of the drivers behind the northern shift, including how financing and tax changes can affect decision-making, and what landlords might want to consider.
Why Buy-to-Let Is Moving North
Investor activity has rotated toward the North of England and the Midlands. By early 2025, around 39% of buy-to-let purchases occurred in these regions, up from 24% in 2007[1]. Lower acquisition costs amplify this shift: northern and midlands investors pay around £150,480 per property on average, while southern buyers face prices closer to £292,240 on average[1]. That gap also significantly affects deposit requirements and stamp duty exposure.
Rental performance strengthens the case. The North East now achieves around 9–9.7% yields compared to 5–6% in London[2]. Such yields create stronger cash flow buffers while mortgage interest rates remain elevated.
London, meanwhile, continues to lose landlord share. Just 8% of local purchases now involve buy-to-let buyers, and over 65% of London-based investors purchase outside the capital[1].
Why the Regional Rotation is Likely to Continue
- Lower prices in the North enable greater affordability in terms of deposit requirements, the amount of borrowing required, and stamp duty exposure.
- Higher yields also help meet lender stress tests more easily even at higher LTVs.
- Regeneration in northern cities drives rental demand.
- Affordability and stress tests in the South are much more challenging.
Another emerging driver in the North is tenant demand. Major northern cities such as Manchester, Liverpool, Leeds and Sheffield have experienced employment growth in sectors such as technology, life sciences and professional services. These sectors attract young professionals who typically rent for longer and often prefer centrally located apartments or well-connected commuter areas. Demand in these regions has pushed rents higher year-on-year, improving returns for landlords.
Additionally, several northern local authority areas have undergone significant redevelopment, including new transport links, cultural investment and university expansion. Such long-term improvements help stabilise rental demand and support potential future price growth, even though yield remains the primary motivator today.
Such projects have also encouraged inward migration from other parts of the country, increasing housing pressure, and creating consistent rental competition in some areas. Sustained demand also strengthens occupancy rates and reduces the likelihood of void periods for landlords.
Mortgage Rates, Lending Trends and Landlord Behaviour
Mortgage rates remain high by historic standards but have eased from their 2023 peaks. During 2025, the average mortgage rate fell below 5%[4]. A typical 75% LTV BTL rate fix averaged around 4.30%[4].
Despite this improvement, landlord activity has slowed over the last few years. New BTL lending fell to £6.3bn in 2023, down 55% year-on-year, and only 11,985 rental purchases were completed with a mortgage[3]. Higher borrowing costs, tax changes and stricter affordability rules have reduced appetite, particularly in lower-yield southern areas.
However, arrears remain controlled. In Q3 2025, only 0.54% of buy-to-let mortgages were in arrears [6]
This stability reflects strong rental demand and the stress-tested mortgage environment introduced under the regulatory regime that prevails today.
Landlords are also adjusting their strategies. Many are opting for:
- Longer fixed rate deal periods to stabilise costs
- Higher deposits to pass affordability tests
- Buying properties that allow for value-added improvements (e.g., modernisation or energy upgrades)
- Seeking regions with better interest coverage ratios, which often means moving north or investing in properties with stronger rent-to-value ratios
Company ownership also continues to expand. More than 400,000 BTL companies now exist, and 61,500+ were created in 2024 alone, largely due to the tax treatment differences between personal and corporate BTL ownership.
Yields, Costs and Cash Flow: What the Numbers Show
Yields reached record highs in 2024, averaging 7.1% across England and Wales[2]. Northern properties often exceed this average, delivering 7–9% or more, depending on location and property type.
A northern terrace purchased for around £150,000 at a 7–8% yield typically produces strong rental coverage. Even with a 75% interest-only mortgage at market rates, rental income often exceeds lender requirements comfortably.
Entry costs remain the main constraint, including:
- A minimum 25% deposit
- The 5% stamp duty surcharge
Even so, total upfront costs in many northern markets remain significantly lower than those in the South, making investment more accessible.
What Today’s Cash Flow Calculations Emphasise
- Interest-only borrowing still dominates in BTL investments, but rising rates compress profit.
- Stress tests require rental income to be 125–145% of mortgage costs [5].
- Tax restrictions limit interest deductibility for individuals.
Operating costs also play a larger role than before. Insurance premia, maintenance costs and letting agency fees have all risen with inflation, meaning landlords increasingly seek properties with fewer immediate repair obligations or opt for lower-maintenance units in modern developments. Higher yields in the North help offset these rising expenses, while southern investors often face tighter margins.
Additionally, tenant demand patterns now influence cash flow. In university cities such as Leeds, Sheffield and Newcastle, student renters keep void periods relatively low, for example.
Landlords are paying closer attention to micro-location trends, including proximity to transport hubs, employer clusters and universities, as these factors strongly shape rental stability. Properties in well-connected or recently regenerated districts are proving more resilient, helping landlords maintain income even during wider market fluctuations.
Tax and Regulation: Why They Affect Where Landlords Buy
Since 2016, regulatory and tax reforms have changed the economics of buy-to-let significantly. Section 24 limits mortgage interest relief to a 20% tax credit, which reduces profitability for highly leveraged landlords. Combined with the 5% stamp duty surcharge and lower capital gains thresholds, this has made southern properties less viable.
Northern regions, where yields are higher and purchase prices lower, tend to absorb these policy effects more effectively. As a result, landlords increasingly concentrate investment in areas where cash flow and tax positions align more favourably.
Looking ahead, future regulation is likely to reinforce this pattern. Although proposed EPC minimum standards were delayed, many lenders still price “green” properties more competitively. Newer northern stock or upgraded terraced housing often achieve better EPC ratings with relatively low-cost improvements compared to older southern conversions. This offers another long-term advantage for investors targeting regions with easier upgrade pathways.
Finally, some councils have introduced selective licensing schemes. While these add cost, they can also improve tenant quality and area standards, supporting higher long-term rents. Many northern investors view licensing not as a deterrent but as part of the broader professionalisation of the sector.
FAQs
Q. Why are landlords increasingly moving their investments to the North?
A. Lower prices, stronger yields and easier mortgage interest coverage make northern and midlands properties more financially sustainable.
Q. Are mortgage rates improving for landlords?
A. Slightly. A 75% LTV BTL rate fix averaged around 4.30% during 2025, and overall mortgage rates fell below 5%[4].
Q. How much deposit is normally required for buy-to-let?
A. Most lenders require a 25% deposit at least, and rental income must cover 125–145% of mortgage payment[5].
Q. Why are more landlords using limited companies?
A. Corporate structures allow full interest deductibility. Over 400,000 BTL companies now exist.
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