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Buy-to-let and house prices

Journalist: Melissa Lawford, The Telegraph

ended 16. December 2022

The Bank of England has warned that high mortgage rates are putting the buy-to-let sector under particular pressure and that this could have wider repercussions for the housing market. Are you seeing buy-to-let landlords selling up as a result of higher mortgage costs? If so, on what scale and in which parts of the country (are landlords under more pressure in London/the South East)? Are they under pressure to sell quickly, and are you seeing any of them accept price discounts?

7 responses from the Newspage community

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Samuel Mather-HolgateVerified
Independent Financial Adviser at Mather and Murray Financial
I've spoken to lots of landlords who want out of the sector, but know that now is not the right time to contemplate selling. They have all told me that they will have to fund their portfolios for no profit over the next 12 months as rates have increased so much. Only once the housing market has returned to levels o this autumn are they willing to relinquish their investments. They know that if they try and sell now they will have to accept 10-15% off the asking price as it is a strong buyers market.
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Craig FishVerified
Director at Lodestone Mortgages
It's not so much the interest rates that are causing pressure but more the ICR stress tests. The good news is that we have seen a couple of lenders reducing their calculations this week, and hope that more will follow. This has had a positive impact on some landlords. Last week we quoted a remortgage client and were unable to obtain sufficient funds to clear his current mortgage, this week that same client can borrow additional funds. This was a difference of around £40k. That said some landlords have said they are going to sell as there is no longer any profit for them, but they won't be rushed and are saying they will hold out until 2024 when they hope prices have stabilized. It seems that this problem is more apparent in London than it is elsewhere in the UK.
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Mike StatonVerified
Director at Staton Mortgages
Being a landlord at the moment is not an attractive opportunity, especially if your remortgage is just around the corner. Affordability Assesments just aren’t fitting with current interest rates, leaving many landlords trapped as mortgage prisoners, unable to obtain the right mortgage for themselves. Only today have I had a portfolio landlord pull out of a purchase as he just can’t be placed with a lender. This hasn’t been helped with todays BOE rate increase, it feels like we’ve let Mr Scrooge and the Grinch join the MPC
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Matthew JacksonVerified
Director at Mint FS
The current situation with Buy To Let affordability and stress testing is simply unsustainable. In short order portfolio landlords will be presented with properties that they cannot remortgage or refinance and will be forced to sell.

This will flood the market with disposals , which will drive prices in certain areas downwards - and of course create a shortfall of avaliable rental property. This issue is exasperated even more in London where it is harder for first time buyers to get on the property market and renting is more prevelent.

I see this as a ticking time bomb - and unless lenders talk to one another , understand the risk and adapt criteria accordingly it will go off in 2023.
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Ashley ThomasVerified
Director at Magni Finance
It’s very tough for landlords right now. I have had a number of clients that have looked to increase the rent to partially cover the higher mortgage costs. Some are seriously considering selling due to the low yield.

However, as always, where there are concerns with the property market, there will be some who will take risks and potentially benefit. In the past capital appreciation on properties has increased over the long term.
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Alastair HoyneVerified
CEO, Finanze Capital at Finanze Capital
High mortgage rates are putting the buy to let sector under pressure. Landlords struggle to refinance as they no longer pass the affordability stress tests due to the increased rates and increased ICR calculations. The current rent they charge isn’t enough to pass the lenders stress tests and the landlords aren’t willing to up the rent out of respect for their tenants. I see landlords who are on the fence about selling their properties and are currently holding out just to see if things do get better in 2023. We’ve already seen lenders such as The Mortgage Works who have dropped their ICR calculations substantially since October, so things do seem to be looking more positive. I have seen landlords in the north struggle more where they cannot increase the rents to the levels they need to, whereas they would be able to in the south.
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Robert PayneVerified
Director at Langley House Mortgages
Property is widely considered a safe investment but for the first time in a long time, the yields have been squeezed so significantly that landlords are reconsidering their strategies. Even the biggest advocates of property investment are now glancing over at the price of Gold or looking to restructure their portfolios to reduce the amount of debt they hold. The knock-on effects will mean increased availability of properties for sale which will drive house prices down and increased demand for rental properties which will drive rent up and only the most desirable tenants accepted.