FT Logo

Copy article

FT Editor Banner

Prospects for buy to let market

Journalist: Ima Jackson-Obot, FTAdviser

ended 02. March 2023

Hello mortgage advisers,

I am writing a guide about the BTL market and the current issues in the sector for which I have some specific questions. Can you briefly tell me what you think the prospects for the BTL market are, and if you can contribute to my guide, please do let me know so I can send you some specific questions.

Thanks

Ima

8 responses from the Newspage community

Copy all

Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
This is the worst environment for buy-to-let landlords in recent times. With tax increases, regulatory requirements, and now a substantial rise in financing costs, many landlords are questioning their holdings. With further interest rate rises becoming more likely, credit needs to be given to those helping solve the crisis in the private rental sector.
Copy

Editor
Jed Newton
Director at Trinity Financial
The rate increases and the subsequent stress test hikes have made arranging buy-to-let mortgages almost impossible. Lenders need to find a way to make their calculations work for clients to allow them to borrow otherwise people will turn their back on the sector. The availability of rental properties will continue to get worse if nothing is done. The interference by the government through taxation and the regulators through rules, plus the stress tests, has almost killed buy-to-let. The increase in rates coupled with these factors will be the end.
Copy

Editor
Craig Fish
Director at Lodestone Mortgages
I have never known a worse time for buy to let landlords, and this doesn't just cover small or accidental landlords, this covers large portfolio, and professional landlords, who are genuinely struggling with not only regulation change but the lender's criteria change too. We are starting to see slight improvements in rate and criteria, but I fear its too little too late.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The buy-to-let market is changing rapidly; due to both rising interest rates, which impact the levels of mortgage that can be generated and also push landlords to increase rent to maintain profitability, also the changes in housing stock needed in terms of EPC ratings - leaving many in the quandary of upgrading existing buildings, or selling those and buying a newer property that already has the correct EPC level (or selling and exiting the market altogether of course, for some the rate of change is just too great).
Copy

Luke Thompson
Director at PAB Wealth Management
The prospects for landlords at the minute and the BTL market in general are very tough. It feels as though landlords are getting it from all sides.

In recent years buyers have used Limited Companies to purchase BTL properties but with recent rate rises these types of mortgages are becoming increasingly expensive. Speaking from my own personal experience I have over £60,000 tied up in a BTL property that because of rising interest rates is currently returning me £50 a month. There is no incentive for me to continue as a landlord.

Coupled with this we have the potential new EPC laws. It is understandable that the government wants to root out bad landlords but they run the risk of losing all landlords and the housing crisis is exacerbated by the lack of social housing currently being built.
Copy

Vishal Vyas
Independent Mortgage Adviser at Private Finance
Buy-to-let and the property market has been and will continue to be a great investment for many. Barriers to entry have increased with heightened stress tests squeezing loan-to-value and continuous tax and legislative changes have pushed out some landlords, many of those who have already profited over the years and are now realising their gains.
I believe more landlords will enter the market and I see many young first-time landlords now looking to enter, some as first-time buyers.

Property is a long-term game and not instant overnight riches, it takes time to build a solid, well-performing portfolio and takes proactive management to ensure the portfolio runs smoothly and assets are maintained to a high standard.

Housing shortfall and many people opting to rent for longer will also play a part.
Copy

Samuel Ewen
Managing Director at Rosehill Financial Services
It's pretty tough out there for buy to let landlords at the moment. Our main buy-to-let landlords tend to buy properties with cash, renovate and then refinance. However, with the rising interest rates and stress testing, they've decided to hold off on refinancing for now due to a large increase in cost. Then there are the future EPC requirements. I understand the concept of improving EPCs, but I'm not sure how this is going to work in reality. I doubt all landlords will be able to get all properties to an A-C EPC rating, at least in a cost-effective enough manner, so you'd suddenly have the issue of tenants being handed their notice or an increase in rent to cover the higher costs.
Copy

Austyn Johnson
Founder at Mortgages For Actors
Rental stress rates really hit the BTL market at the end of 2022. This year, lenders will want to continue building their war chests and will start to offer better and better rates and figures to help. This year will see the BTL market start off slow but quickly pick up to be as busy as before.
The main issue with the stress rates mean that landlords are looking at higher deposits to buy property. When this sorts itself back out, there is no stopping them. Whats a rate when you can still profit?