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Buy-to-let/portfolio landlords

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 07. October 2022

Looking to speak to mortgage brokers about the buy-t-let let sector and potential impacts on portfolio landlords and areas of complex buy-to-let. 

  1. What is going on with product choice and stress rates in the buy-to-let market currently? Will this continue?
  2. Will this lead to landlords exiting the market? Will this be small landlords or portfolio landlords? 
  3. Will areas of complex buy-to-let like student lets HMOs etc come under pressure?
  4. What advice would you give to portfolio landlords and those who operate in complex buy-to-let spaces?

5 responses from the Newspage community

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Craig Fish
Director at Lodestone Mortgages
Since the now notorious mini-Budget, the mortgage market has taken a bit of a hit due to lenders withdrawing products, adjusting pricing, and amending their affordability calculations. Nowhere has this been more prevalent than the BTL market. Not only have we seen interest rates go up to 6% and 7%, but we have also seen stress tests dramatically increased, and now using interest rates in excess of 8%. The result of this has been significant and many scenarios that landlords approach us with are just not feasible, as the expected rental income doesn't cover the mortgage they require. This is affecting those who are relatively new to the btl market more than the experienced portfolio landlords. At the first sign of a downturn, portfolio landlords tend to release equity from their properties in order to have cash ready to snap up bargains that come to market. The stress tests are limiting the capital that landlords can release, but those portfolios that aren't as heavily geared are much less affected. That said, the commentary that we are getting from the coal face is that landlords are now increasingly considering using limited companies to make their future purchases, and for the properties owned in personal names, some quite significant rent reviews will need to take place in order to make it viable. To make an educated guess I would think that for a period of time we wont see many new landlords enter the market, some heavily geared landlords are likely to leave the market, and those who have managed their portfolios well over the years, will continue to grow but at a much slower pace. The largest single outcome that I can forsee is that tenants are going to be faced with increasingly larger rents or face evicition.
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Rob Peters
Principal at Simple Fast Mortgage
Interest rates have increased so stress tests increase and this ultimately makes it harder for landlords to get a mortgage, unless rents increase, too. This has been a short sharp increase in interest rates, and putting rentals up just as quickly could have a serious impact on tenant affordability resulting in arrears, and potential homelessness. It is a further challenge for landlords on top of the many challenges of recent years and undoubedly some landlords will exit the market. Equally this will provide massive opportunity for other investors and property buyers.
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Imran Hussain
Director at Harmony Financial Services
Buy to let right now is under massive pressure. With the stress tests rising for some lenders now to 8.5%, it means buy to let in certain parts of the country is well and truly dead unless rents increase dramatically to meet the requirements for loans to be achieved. Any landlord operating in any complex spaces right now needs advice more than ever. Those who skimp on advice will only be caught short in the next few months.
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Michael Webb
Managing Director at Mortgage Republic
Over the past, 10 years there has been a significant uplift in activity in the HMO market. Many landlords have seen this as a way to make stronger returns from their investments, both in terms of capital appreciation and monthly income. We are now entering a time where these HMO landlords are under constant financial attack. Most HMOs are utilities inclusive, and as such those rising costs are eating into margins rapidly. Add to that increased mortgage costs, and more stringent stress testing and we are starting to see a cooling in this market, which is far from a hands-free investment, but historically offset that fact by much better returns. Many HMO landlords will look to dispose of their assets in the coming year, if they are not already underway with it already from our conversations.
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Marcus Wright
Managing Director at Bolton Business Finance
We had a large number of our important buy-to-let mortgage lenders pull their products last week due to market volatility. Many but not all have relaunched products this week at much higher rates. For example, 6 months ago buy to let mortgage rates for limited companies were around 3-4%. Whereas with these new products launched this week, many are 6-7%. This represents a massive increase for landlords and those with low yielding properties now risk not passing stress tests for affordability. Landlords with portfolios need to look ahead at what deals expire when and plan in advance, in case they need to inject extra equity by selling or via cash reserves.