by House4Students 
After several years of steep hikes, interest rates are finally beginning to ease — but they’re still far from low. For landlords and property investors, this creates a complex environment. Higher borrowing costs remain a factor, but so does opportunity. Student housing, in particular, has shown resilience through turbulent times. But how does this niche of the property market hold up in 2025?
💷 Why Interest Rates Still Matter
While the Bank of England base rate has started to tick downward from its 15-year highs, many mortgage products are still priced conservatively. For landlords with expiring fixed-rate deals or those purchasing new properties, costs remain significantly higher than during the ultra-low rate era of the 2010s.
A typical 5-year BTL fix now sits around 4.6% to 5.2% depending on LTV and credit.
Lenders remain cautious due to inflationary stickiness and economic uncertainty.
Moreover, it’s worth noting that landlords can no longer offset mortgage interest against rental income for tax purposes unless operating as a limited company. This means higher interest payments eat directly into net profits. (See our upcoming blog on tax efficiency for more on this.)
🏠 Why Student Housing Stands Out
Despite these pressures, student housing remains relatively insulated compared to other buy-to-let sectors:
- High demand: UK university applications continue to rise, with over 767,000 applicants in 2024, and demand from international students remains robust.
- Group tenancies: Student lets are typically let by the house, not the room. This reduces void risk.
- Academic calendar: Predictable cycles and fixed 12-month tenancies help with planning.
Moreover, the student market often commands higher yields, especially in popular university towns like Reading, Bristol, and Nottingham.
📊 What the Numbers Say
Recent data shows:
- Purpose-Built Student Accommodation (PBSA) yields average 6% to 8%, while well-located HMOs can push 8% to 10%.
- Undergraduate enrolments have grown 7% over the past 3 years.
- International student numbers are projected to grow another 10% by 2026 (British Council).
Mortgage approvals for BTL properties have declined year-on-year since mid-2022, with UK Finance reporting a 20% drop in new BTL mortgage volumes in 2024 compared to pre-pandemic levels. This has cooled some of the buying competition, but lenders remain active — especially for well-positioned assets like student HMOs and PBSA units.
Student properties can sometimes be seen as riskier by lenders compared to professional lets, particularly for HMOs, which often require specialist products and tighter underwriting. However, experienced landlords or those purchasing via limited companies continue to find competitive offers.
⚡ The Risks Are Real, But Manageable
High interest rates do increase exposure:
- Cashflow pressure: Especially for leveraged landlords with interest-only loans.
- Void periods: If you miss the student intake cycle, finding tenants off-season is difficult.
- Regulatory risks: Renters’ Reform and licensing schemes add operational overhead.
But the sector also offers mitigation:
- Long tenancy durations (academic year)
- Strong rental income relative to property value
- Flexibility to adapt (e.g. switch to short-lets or professionals in off-peak years)
🌊 Our Outlook for Landlords and Investors
If you’re holding a student property with a stable tenancy, the higher interest rate environment may be a short-term drag but not a deal-breaker. For new investors, opportunities still exist via:
- Fractional ownership models
- Cash purchases or low-LTV financing
- Hands-free PBSA investments with defined exit timelines
And with the right guidance, even smaller landlords can compete by investing in quality furnishings, modern appliances, and easy-to-maintain finishes.
Student tenants are more resilient than the average renter. They’re not chasing lifestyle properties; they want value, location, and reliability. Get those right, and your investment can still thrive in 2025.
