I fully understand why, for example, UK Finance suggested buy-to-let purchase business will be £7bn in 2024, while remortgaging will be down at £19bn, but my own belief is these are conservative estimates.
Certainly, our own figures for last year did not drop by anywhere near those of the wider buy-to-let sector, and perhaps I’m therefore looking at this with a specific Fleet Mortgages’ hat on, rather than in a wider sense.
Reasons to be optimistic
Even so, I think there is much to be positive about in the buy-to-let market, albeit we should highlight some of the ongoing challenges that remain for landlords, not least higher mortgage costs, increased taxation requirements, etc.
That said, when it comes to the former, rates have fallen off those 2023 highs and therefore affordability is easing, and for the latter, well landlords have had to put up with this for many years. We may all be hoping for some respite via the March 6 Budget, but one wonders how the news that the UK is now in recession will be met by the Chancellor and what that does to any plans he may have had to act, specifically when it comes to stamp duty?
Those challenges may well remain, however clearly landlords have benefited from strong tenant demand driving rents and yields, plus of course the fact we still have a shortage of private rental sector (PRS) property for tenants to choose from in a large number of areas in the country.
It is not a uniform picture by any stretch of the imagination. My own opinion is that rental levels are likely to cap out during 2024 after a period of significant increases. However, in our experience, landlords are not leaving the sector in droves, and – where possible – there is still appetite to add to portfolios, because landlords are aware of the demand/supply imbalance.
A vital need for landlords
This has eased somewhat but the demographics won’t change.
Just look at the increase in the UK population over the past 10 years, the forecasts for many more millions of people in this country over the next couple of decades, the current house-building impasse, the lack of social housing, the increase in the number of single households, the cost of living crisis and the ongoing difficulty in purchasing a first home, and you should come to the conclusion that the PRS is going to be needed even more than it has been up until now.
Of course, we have a General Election this year, which might well herald a new government with a new agenda, but whoever forms the next administration is going to be facing an economic situation which is far from ideal. Solutions are not just expensive but are going to take a long time to deliver any tangible improvement, so the short to medium-term environment looks likely to be similar.
Which means the need for ongoing advice by landlords remains strong, particularly as the sector has become more professional, more portfolio-focused, and of course, more complex, with a greater number of product solutions available, and a much more difficult path to traverse in terms of dealing with landlords, their financial situation, and what they want to do with their portfolios.
The further good news comes in the form of lender appetite, product options improving, rates easing slightly, and a genuine commitment to the sector and ensuring advisers can support as many landlord clients as possible.
Providing certainty and transparency is key here, which is why we launched a product transfer range last year, which in Fleet’s case, comes with less all-in costs than our rates for new business. We wanted to ensure existing borrowers had options from Fleet as they came to the end of their deals, and we also didn’t want to harm loyal customers who wanted to stay with us.
Overall, I’m positive in the way the year has kicked off, and in what is to come through the rest of 2024. Advisers should feel similarly.
The buy-to-let mortgage market is dynamic and changes constantly; landlords are far less likely to want to carry out this work on their own and the security and benefits of using a professional adviser are unlikely to lose their allure anytime soon.
