Challenging? Topsy-turvy? A rollercoaster ride with too many dips? One to make sure you take every single opportunity that presents itself? All of the above?
Certainly, from a buy-to-let lender perspective, it has been another of those years which started off in a way which promised a lot, only to be taken over by events – beyond our control – that ended up taking us in a direction which we couldn’t have foreseen.
Clearly, from the Spring onwards, 2023 was a very different year to the first few months, which had regained the stability lost in Autumn 2022, and – from a product/rate/activity perspective – were looking fairly solid.
Then those events happened. Or rather the drops in inflation we were led to anticipate would happen, didn’t materialise. Quite the opposite. Which took rates much higher – particularly swaps – and led us to a path of many lenders having to withdraw a significant number of products and reprice higher those we were able to bring back to market.
Again, far from ideal in anyone’s language, and from that point it was a fairly arduous, and quite long, slog back to a product range which looked more like that early 2023 period, and rates which (at least over the last couple of months) have been heading downwards.
EPC standards will return and rates will fall
That, of course, is incredibly important as we motor into 2024, particularly the point about having a much broader range of products, whether that be two-, five-year options, not forgetting trackers, or indeed green options for those purchasing or remortgaging properties with an EPC Level of C or above.
On that issue, despite the rowing back of the government in this area – which may well give landlords a bit more time to literally get their properties in order when it comes to energy-efficiency and EPC levels – it’s still our contention that this is not an issue that is going away anytime soon.
We fully expect, at some point in the not so distant future, we’ll have minimum EPC standards for PRS properties, and those standards will be C and above. It’s why we continue to offer cashback to those improving their EPC during their fixed-term period, because we believe such work and such improvements aids both tenants and the landlord itself.
Rates head down on buy to let
And, from a rate point of view, we are seeing continued downward pressure, and if inflation can (hopefully) continue to fall in 2024, then the need for rate rises recedes, and we get ever closer to a fall in base rate and, more importantly, continued falls to swaps.
As I write, swaps continue to inch closer to their levels of a year ago, and this can only be good news for us as lenders, who can shift our product rates accordingly, and as a result, see advisers and their borrower clients much more comfortable with affordability criteria in order to get the loan sizes they need.
That has clearly been a major issue for many advisers/landlord borrowers, not just in terms of wanting and needing finance to add to portfolios, but also clearly in terms of heightened mortgage costs for existing borrowers who have unfortunately come to the end of their product deals during this period.
The industry will continue to look at product solutions for these situations – higher fee/lower rate products for example – but it would still be a positive right across the board if we have rates continuing to fall, because this gives greater confidence to purchasers, plus more options beyond the PT for maturing loans.
Overall, as we come to the end of 2023, it is perhaps time to make the most of the Christmas and New Year holiday, and hopefully take a break from the market for a week or two. This year has been tough, and there are no guarantees 2024 will not be the same, however it’s my belief that we are in a different place to just six months ago, and it’s certainly a more positive outlook for the year ahead.
