HMO Finance in 2025: What Landlords Need to Know
11th February 2025
By Luke Martin, Senior Mortgage and Protection Advisor
HMO (House in Multiple Occupation) investment remains a high-yielding opportunity in 2025, but with shifting interest rates, evolving regulations, and lender criteria becoming more refined, landlords need to stay ahead of the curve. Whether you’re an experienced HMO investor or considering your first shared rental property, understanding the current financing landscape is essential.
The Impact of the Base Rate Reduction
After months of stability at 5.25%, the Bank of England has started to reduce the base rate, signalling a potential shift in the mortgage market. While lenders are adjusting their pricing cautiously, we are seeing HMO mortgage rates become more competitive compared to the highs of 2023.
Some lenders have introduced lower 5-year fixed rates below 5%, a welcome relief for landlords looking to lock in long-term certainty. However, lenders remain cautious with HMO valuations and underwriting, ensuring rental income is sufficient to cover costs.
HMO Mortgage Trends in 2024
More Lenders Entering the Market
Specialist lenders continue to expand their HMO mortgage offerings, providing investors with greater choice. While mainstream banks still prefer standard buy-to-let, niche lenders now cater for:
- Larger Multi-unit HMOs (6+ bedrooms)
- Semi-commercial HMOs (above shops, mixed-use buildings)
- Limited company borrowers, often offering more tax efficient solutions
EPC Ratings Matter More Than Ever
Lenders are placing greater emphasis on energy efficiency, with some restricting the best rates to properties with an EPC of C or above. If your property has a D or E rating, refinancing could mean higher rates or additional requirements for energy improvements. Investing in insulation, heating upgrades, and energy-efficient appliances can help secure better finance deals.
Licensing and Regulation are Tightening
HMO licensing rules continue to evolve, with more councils introducing Selective Licensing Schemes. This means even smaller HMOs (3-4 tenants) may require licensing in some areas. Key updates include:
- Tighter local licensing restrictions (Article 4 in many city areas)
- Minimum room sizes still strictly enforced (typically 8 sqm for single rooms)
- HMO valuations considering tenant demand and property condition
What This Means for HMO Investors
While financing HMOs is more complex than standard buy-to-let, the rewards remain strong. Demand for shared housing continues to outstrip supply, particularly in student towns, commuter hotspots, and areas with young professional renters.
With mortgage rates starting to stabilise, 2025 could be a good time to secure long-term finance and restructure your portfolio. If you’re considering refinancing or expanding your HMO investments, speaking to a specialist mortgage broker can help you navigate lender requirements and secure the best terms.
Luke Martin
Senior Mortgage & Protection advisor
OnPoint Mortgages Ltd
Mobile: 07584086622
