Once again – even though there have been countless people repeatedly wrong on this count for many, many years – it has led to some commentators prematurely calling this ‘the death of buy to let’.
You might expect me to say this, but nothing could be further from the truth, however it goes without saying that no-one would have wanted to have experienced the last three weeks, particularly when the catalyst was our own government’s mini Budget.
A need to act
The resulting increase in rates and stress testing and the need to pull products was not of the industry’s own making, but was ostensibly because of the need to act, and act quickly, in the face of huge market volatility.
It is a ‘law’ of lending that everyone has to follow – although some have come a cropper by not following it in the past – that you cannot lend out money at a rate less than the cost of those funds.
Which is why we’ve seen the number of buy-let-mortgage products fall so quickly, and why, particularly for fixed rates, we’ve seen lenders move away from shorter-term fixes. Plus, of course, with higher rates – and a need for greater certainty on borrower affordability – we have seen rental cover stress rates rise.
Let’s be in no doubt here, that none of this is ideal and certainly not the approach that buy-to-let lenders would have wanted to take – and certainly not Fleet Mortgages.
However, we do not operate in isolation and have to take into account those lenders reliant on capital markets, the pricing and product ranges of competitors, plus of course our own needs and service capacity.
Still life in the market
Yet, despite all this, this is not the death of buy to let by any stretch of the imagination.
With the significant government U-turns made by the new Chancellor appearing to calm markets already, it is my sincere hope that we will start to move the dial both in terms of pricing and to other elements of the buy-to-let proposition in order to support those landlord borrowers in either their purchase or remortgage needs.
This is not a prediction of a significant retrenchment in terms of mortgage rates, but we’ve already seen the markets begin to dial down their own expectation of what rates will be in a year, and that will be reflected at some point, in mortgage pricing.
What is also important to recognise here is the ongoing importance of buy to let, and the need for further supply within the private rental sector, not less. The stamp duty cut – which given the increase in mortgage rates – did appear to have been completely enveloped could now come into its own, and the fact it is available to landlords should provide a greater incentive to purchase, if this can be combined with competitive finance and of course tenant demand and profitability.
A desire to lend
Our aim certainly is to be as competitive as possible, and we also maintain a strong appetite to lend in this space. We are a specialist buy-to-let intermediary lender after all, and my belief is that advisers and their landlord clients will start to see some movement in terms of rates and criteria over the coming weeks.
Stability and certainty has been at a premium, and landlord borrowers may well have found this has gone amiss over the past month or so. However, the fundamentals of a long-term investment in buy-to-let remain strong – tenant demand continues to grow and it’s blindingly obvious that the private rental sector needs an increase in the supply of properties in order to meet that demand.
Marrying that up with access to a stamp duty holiday, and hopefully something of a return to a pre-mini Budget pricing environment, means that landlords should continue to seek further portfolio growth.
Advisers will, of course, play a vital role here and these latest tax cut U-turns, and what hopefully follows, presents a further opportunity to continue communicating with landlord borrowers, easing their existing finance path and meeting their demands for the future.
