There’s a lot going on in the Buy to Let Mortgage world a lot of it analysed by Paragon who are the premier firm in specialist buy to let. One of the biggest fears that landlords, lenders and brokers should have is that buy to let mortgages would become regulated under new European legislation.
he initial draft of the legislation seemed to suggest that most residential property would come within the scope of discussions. With the unique opportunity landlords currently have in the UK where a competitive buy to let mortgage industry thrives there is a strong argument for excluding this area from EU regulation which is primarily aimed at protecting homebuyers and not professionals looking to invest in property.
Moneymarketing reported that the Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association were represented at a recent trip to Brussels and that discussion was fairly constructive. This is important as current conditions are good for buy to let landlords but they are not impregnable. Increased lender costs combined with the increased difficulty obtaining a good buy to let mortgage rate that would follow treating a buy to let mortgage in the same way as if it were a consumer activity would put huge pressure on owners.
This pressure would come at a time where some are suggesting (Heron was one of them in a recent Mortgage Strategy Interview) that rents are reaching a level where tenants will start to become priced out. Some of the factors which have led to inflation busting returns in the buy to let mortgage market are also set to end – housing benefit subsidises private landlords: it’s easier to charge higher rents while your tenants are receiving it. In the medium term increases in housing benefits will no longer be at a sufficient pace to support the rent increases landlords have enjoyed in recent times. With salaries also stagnant some tenants will start to be priced out of the most expensive areas and landlords will find a ‘ceiling’ on rent. They may find that ceiling at the same time as mortgage rates increase following adjustments by the Bank of England as we move into next year.
Much as stock investors often look overseas for the newest and most profitable opportunities (this isn’t investment advice – just an observation!) many landlords will now be poised to start looking in cheaper but potentially up and coming zones outside those currently the most popular. Selecting a good value property that can withstand these pressures will be important. There is considerable good news though – as commercial development finance becomes available again and a number of bridging finance providers come back to the market development and refurbishment of properties becomes more straightforward for landlords to finance. There’s no question we need an increase in the availability of property stock and any moves to ease supply and allow buy to let landlords to purchase as many properties as they’d like helps support more affordable portfolios for landlords and better value rent for tenants.
The other good news is that buy to let mortgage rates are currently low and the choice is considerably higher than it was a year ago. A quick search on any of the popular mortgage search applications used by professionals reveals almost double the number of products available. Many more are available through exclusive buy to let rates through brokers. This is great news for landlords – refinancing or purchasing now involves choosing the best buy to let mortgage not just hoping that you find one at all. These better deals allow landlords to give their tenants better value whilst also making more themselves – a significant improvement which takes some of the edge off the other pressures landlords are currently facing.