Buy-to-let market trends
What are the current trends in the buy-to-let market?
How buoyant is the buy-to-let market at present?
What are your expectations for the buy-to-let market in 2023?
What are the challenges in the market right now?
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6 responses from the Newspage communityCopy all
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The buy-to-let market has taken another battering over the last few weeks with product rate hikes and withdrawals. Paragon recently launched a selection of buy-to-let deals with five per cent arrangement fees which shows what many landlords potentially need to pay if they want a really competitive rental calculation.
Lending volumes in the buy-to-let sector have already been hit in recent years but new purchase enquiries from landlords have dropped even more recently.
Many buy-to-let investors with mortgages will be taking PTs with their lenders rather than remortgaging because switching lenders is almost impossible. Buy-to-let standard variable rates are also shockingly high in many cases so they cannot afford to revert to their lender's variable rate.
Lending volumes in the buy-to-let sector have already been hit in recent years but new purchase enquiries from landlords have dropped even more recently.
Many buy-to-let investors with mortgages will be taking PTs with their lenders rather than remortgaging because switching lenders is almost impossible. Buy-to-let standard variable rates are also shockingly high in many cases so they cannot afford to revert to their lender's variable rate.
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We're seeing an increasing number of landlords struggle to get the borrowing amounts they'd like because of higher-rate stress tests used against rental income. This has meant we've had more occasion to recommend products with lower pay rates but higher product fees to boost the borrowing capacity.
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We are finding most landlords are wanting two-year-fixed deals over five-year fixed deals, mainly due to the expectation, mortgage rates will be lower in 2024-25. However, most are finding the rent they receive is not high enough to fit the rental calculations for a two-year deal. Furthermore, the ability to use top slicing has also diminished. Precise Mortgages recently changed its policy on top slicing and no longer accepts this for remortgages. As a result, the potential options for most landlords are limited and we are advising most landlords to complete a product transfer with their current lender.
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A fair amount of BTL landlords are looking to HMO properties now due to the uplift in income, but they need to make sure all the outgoings are considered too. These can be lucrative properties, but are much more hands on than the usual BTL single let.
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Rents must go up and expectations must be aligned to the market conditions!
The BTL market is the backbone of affordable housing since the heavy exit of council-owned properties in the 70,80&90's. In recent years landlords have enjoyed unprecedented low rates allowing fantastic cash-flowing businesses. With base rates (swap rates if you will) increasing, lenders have had to increase rates to maintain their margins, leading to these cash-flowing assets being tested far higher than landlords are accustomed to. We have seen landlords who haven't increased rents for years now faced with mortgages doubling in some cases. The only solution is to reflect this in the rent and thus drive up tenants' cost of living, risking losing good tenants.
Landlords should reflect on their property holding strategies as its always been a long-hold game, so quick and easy cashflow may need to be a reflection from the last few years.
The BTL market is the backbone of affordable housing since the heavy exit of council-owned properties in the 70,80&90's. In recent years landlords have enjoyed unprecedented low rates allowing fantastic cash-flowing businesses. With base rates (swap rates if you will) increasing, lenders have had to increase rates to maintain their margins, leading to these cash-flowing assets being tested far higher than landlords are accustomed to. We have seen landlords who haven't increased rents for years now faced with mortgages doubling in some cases. The only solution is to reflect this in the rent and thus drive up tenants' cost of living, risking losing good tenants.
Landlords should reflect on their property holding strategies as its always been a long-hold game, so quick and easy cashflow may need to be a reflection from the last few years.
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The market is very challenging for BTLs, especially in London where the yields are lower. However, there will be a lot of opportunities for those with a high deposit.