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What is the outlook of the BTL market?

Journalist: Jake Carter, Mortgage Introducer

ended 22. August 2023

With Bluestone exiting the buy-to-let market, is this an indicator that the market is on a downward path?

From what you have seen, how is the buy-to-let market fairing?

What would you like to see introduced to stimulate the market?

10 responses from the Newspage community

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Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
No disrespect to Bluestone, but I think they would concede they were never a major Buy To Let player, and now with Shawbrook acquiring Bluestone earlier this year, it was always on growth in the residential sector. On one hand, the BTL sector has never been better for the seasoned property investor with rising rents, and bigger yields, but equally, mortgages required to finance these deals have come under extreme pressures, with many deals collapsing, or not proceeding with. Possible ideas to stimulate this sector, include the following: reductions in stamp duty for buy to let investors, introduce tax breaks for landlords, and of course reviewing ICR calculations including scrapping basic rate/high rate tax payer differing rates, temporarily. And as we all follow the code of Consumer Duty. Appreciate the majority of BTL transactions don't fall under FCA regulation, but surely something needs to be done with lender fees - just getting out of hand at present.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
With all the constant attacks on landlords from all sides, there is no surprise the sector is in decline. Margins have been under pressure, so unless the property is a House under Multiple Occupation (HMO), a holiday let, or owned as a limited company, the figures likely do not add up currently.
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Mike Staton
Director at Staton Mortgages
The buy-to-let mortgage market has found itself the punching bag of the industry recently. Stress testing has led to lenders requiring unrealistic rental figures to meet affordability for the mortgage a landlord requires, this forces the landlord to remain with the lender they are currently with on extortionate rates, this is very close, if not the same as creating mortgage prisoners through no fault of the client. The fees lenders are charging are borderline profiteering. In a time when consumer duty is on everybody's lips, the buy-to-let industry seems to have ignored the process.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
Investors are still purchasing buy-to lets but the margins are tighter due to higher rates. Mortgages are somewhat trickier to source with high-stress rates but with the right deal, there is still money to be made. Most investors will agree that the last 2 years have been tough for investors due to the demand for FTB and HMV purchases. The movement in the market is opening doors again for investors. More are now utilising LTD CO mortgages to combat the rising rates and tax costs associated with being a landlord.
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Ross McMillan
Owner/Mortgage Advisor at Blue Fish Mortgage Solutions
In Scotland, misguided government actions, coupled with punishing taxes and laws, have dealt a double blow to struggling landlords. These landlords are already grappling with skyrocketing mortgage rates, excessive lender charges, and gruelling stress tests that plague other parts of the UK.

Yet, against all odds, most landlords are standing strong, holding onto their portfolios with a long term vision. They're adapting to the market by raising rents whenever possible and striving to counterbalance the onslaught of negative factors hitting them.

Though yields have taken a hit due to soaring rates, a diversified portfolio can still yield decent returns and hold promise for long-term capital growth. However, the realm of new buy-to-let purchases has all but vanished and without substantial drops in rates and associated fees, it's hard to imagine this landscape shifting anytime soon.
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James Bull
Mortgage Broker at JB Mortgages
Buy-to-let mortgage affordability is calculated by the amount of rent a property will achieve applied to a formula that will calculate if this will cover the mortgage payments. Low mortgage interest rates over the last few years have meant this was easily achievable and it was very easy to obtain the mortgage required. However, now interest rates have increased so does the rent needed to cover the mortgage payments. This is meaning higher deposits are required in order to proceed with buy-to-let purchases. At the end of the day a buy-to-let property is an investment, and if the returns do not stack up for landlords due to expensive mortgages then of course they will most likely put any purchases on hold, and this is what we are seeing in the market.
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Clive Read
Owner at Goldmanread
Buy to let landlords have become the favourite Enemy of the People for both politicians and the renting public. As a result of tax, regulatory and interest rate changes they are exiting the market in droves. This means there's a lack of properties on the market, with a recent report showing there are 20 applicants for every one rental property. This is sometimes worse in London. Unfortunately hammering landlords is not working and only making the situation worse. There's little lenders can do to reverse this situation given the regulatory strait jacket imposed on them when it comes to buy to let lending. The changes must come from the government who have to face up to the situation that their legislation has caused. They need to reverse the tax changes on buy to let and actively encourage, at the very least, those still in the market to remain.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
The buy-to-let market is tough against a backdrop where it's politically expedient to give landlords a good kicking rather than deal with the root cause of people struggling to get onto the property ladder - the lack of homes. It feels like everything is stacked against landlords who play a vital part in a functioning housing market and it is driving many from the industry sadly.
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Austyn Johnson
Founder at Mortgages For Actors
Bluestone only had about 3% of their business as BTL in the last couple of years. Its not viable to keep that product in the market. They specialise in adverse credit resi mortgages, they have just gone back to being 100% in the market for this. BTL lending is down a little but we are still seeing a decent amount of enquiries for it. The stress tests are what let the deals down. Smaller mortgages are more likely to pass with rental income whereas bigger mortgages for the southern property market are suffering a bit. Until its possible to bring stress tests down properly, the market will be slower.
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Christian Duncan
Managing Director at Manchester Mortgage Centre
Bluestone Mortgages have recently taken the decision to leave the buy-to-let market as it only made up a small percentage of their business. This also comes off the back of them being acquired by Shawbrook. Having placed a buy to let clients with Bluestone they offered a very unique set of criteria that will be missed for sure.

The buy-to-let market is suffering as a result of the rate increases and this is something that I don't believe is going to get much better in the short term. The UK property market needs, buy to let investors provide affordable housing but this is becoming a less attractive investment as rates increase. Portfolio landlords in particular are finding lenders' criteria and stress testing difficult.

It would be nice to see lender product fees capped when it comes to buy to let products to ensure it's a level playing field. Certain lenders are now offering products with 5% product fees in a bid to help landlords pass stress testing.