Specialist lender Somo reports strong demand for its new Landlord’s Breathing Space Loan since launching the product last month, with 65% of enquiries coming from landlords facing immediate refinancing pressure.

The product, which offers up to 24 months with no monthly payments, was designed specifically for landlords under pressure from the Renters’ Rights Act, high mortgage costs and reduced rental margins. Loans range from £25,000 to £3 million.

Refinancing pressure drives demand

The figures highlight the financial strain facing many buy-to-let investors as they navigate a difficult market. With buy-to-let mortgage activity rising as landlords refinance maturing deals, many are finding their margins squeezed by higher interest rates and increased regulatory compliance costs.

Other reasons cited for enquiries include funding compliance upgrades, property refurbishments, and covering arrears during void periods.

Jade Keval, sales director at Somo, said: “Landlords aren’t rushing for the exits, they’re looking for time and flexibility while they adjust to reform, refinancing pressure and higher costs.

“Breathing Space gives them exactly that: liquidity without the monthly strain, and the freedom to make strategic decisions rather than distressed ones.”

How the product works

Unlike traditional buy-to-let mortgages, the Breathing Space Loan allows landlords to defer all monthly payments for up to two years. Interest is rolled up into the loan, giving landlords time to stabilise their portfolios, complete necessary works, or wait for better market conditions before refinancing onto a standard product.

This structure is particularly appealing to landlords who need short-term capital but cannot service additional monthly payments alongside existing mortgage commitments. Common use cases include:

• Compliance works – funding EPC improvements or Decent Homes Standard upgrades
• Refurbishment – upgrading properties between tenancies to command higher rents
• Arrears management – covering shortfalls during extended void periods
• Refinancing bridge – providing liquidity while waiting for better mortgage rates

Wider market context

The demand for breathing space finance reflects broader pressures on the sector. Recent data from Paragon Bank showed £49.7 billion in buy-to-let mortgages are due for refinancing over the coming year, exposing many landlords to significantly higher monthly costs than when they originally borrowed.

Meanwhile, the Renters’ Rights Act introduces new compliance requirements and removes Section 21 possession rights, adding to the operational burden on landlords already dealing with reduced yields.

Opinion

The strong uptake of deferred-payment products tells us something important: many landlords are not ready to sell, but they do need time to adapt. Whether bridging finance can genuinely provide that runway depends on what happens to rates and rental yields over the next 24 months. For some, it may simply delay the inevitable.