Over the last few years, the Buy-To-Let (BTL) market has been dwindling; with the general consensus being it was finished. Done. Finito. What with the diminishing supply of new houses, the Labour Party’s Renters Rights Bill, Section 21 being abolished ,the introduction of legally enforced repair deadlines and new council powers to inspect and regulate private rental housing, joined with the possiblity of rent caps, the wider view was that there is no need to invest in the BTL market. In fact, we have seen a large number of landlords fleeing the BTL market as they do not view it as a safe or profitable investment at this point in time.
However, the underlying numbers suggest something wholly different. BTL mortgage appeals are still higher than they were in 2020, with the only decline showing in 2021-23, with some predicting that BTL mortgages will rise again in the winter months of 2024. With the demand for houses at record levels due to the UK’s rising population, this demand is likely to continue – helpfully boosted by the UK’s shift towards single-person households (up 8.9% over the last decade). This demand for houses is not likely to be met by new-builds soon, and the 1.5 million homes that Labour want built seems unlikely to be met in any meaningful manner until the end of the 5 year period. This is a problem that stretches back to Tory rule, as there has been a year-on-year failure to meet the target of 300k new homes per annum. With the private rental sector only increasing their housebuilding by 227k homes per year over a decade in order to meet the target of 1.8 million homes by 2032, the private rental sector is actually falling, not rising – in 2022 the private rental sector was down 25% from 2019.
Now, this all sounds very doom and gloom, but within a storm cloud the sun can peek through. The high and rising demand coupled with a limited supply means that landlords are able to offset extra cost and risk through rent rises. This trend is set to continue for the foreseeable future. If landlords are able to keep their mortgages under control and ensure that responsible tenants are in place they can expect to grow their rental income and make some good profit. Furthermore, Labours rental reforms will not come into effect for at least 18 months, and there are hopes that rental caps are not introduced - given the supply reducing impact these have had in Scotland.
This idea is further corroborated through a number of lenders slashing their BTL rates:
Family Building society have made 0.30% reduction on BTL products – with a rate now of 4.59%, a max LTV of 65%, up from 60% and a min/max loan size of £45k-£750k.
Accord mortgages have also further cut their BTL products by 0.30%. 2-year fixed rate is now 5.09% (down from 5.24%) up to 80% LTV. 3-year fixed rate is now 4.44% (down from 4.64%) for remortgage, up to 65% LTV. 5-year fixed rate is now 4.04% (down from 4.34%) for purchases up to 60% LTV.
Landbay have cut rates across all their BTL product range with 51 products down as far as 0.20%. Standard 5-year fixed rate starting from 4.39% up to 75% LTV. HMO and MUFB 2 year fixed rate options starting at 3.89% up to 75% LTV. 5-year fixed options have rates starting at 4.79% across 75-80% LTV. Trading company products (for clients looking to purchase from within an existing company) have rates starting at 4.69%.
Lendinvest also have a reduction in BTL mortgage rates, with rates starting from 3.44%. -the lowest of the year.
Whilst the general view may be that the BTL market is suffering, there is enough in the data to suggest that this will not continue for much longer.
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