Figures published by UK Finance confirmed what we already know ‒ last year was a challenge, with economic instability and rising rates resulting in the lowest level of buy-to-let (BTL) lending since 2014.
But the usual optimism of spring has also been buoyed and things are looking better for brokers.
All the main UK inflation metrics fell in February, with the Consumer Prices Index (CPI) dropping from 4% to 3.4%, while recently released Office for National Statistics (ONS) figures revealed UK GDP returned to growth in January after falling into recession in the second half of 2023.
Positivity among landlords
While lenders must be responsive to markets that remain sensitive amid continuing economic and political uncertainty, pricing has eased as swaps have fallen from the highs we saw last summer.
This is helping to instil confidence, particularly amongst portfolio landlords – those who own four or more properties. Research for our Portfolio Landlord Report 2024 revealed that almost four in 10 (37%) portfolio landlords plan to increase the size of their portfolios in 2024.
Owning more properties means that portfolio landlords can be well-positioned to leverage existing investments as part of their growth strategies. Our research supports this notion, revealing that of those who intend to buy this year, 55% will release equity from other properties in their portfolio to fund expansion, the second most common source of funding behind using existing capital, selected by 58%.
With the majority of these planning on purchasing with a mortgage ‒ 61% ‒ we can see that the remainder of 2024 looks brighter than last year.
A better outlook
In addition to the anticipated rise in purchases, brokers should be encouraged by industry data highlighting that over 200,000 mortgages are set to reach maturity throughout the year, valuing approximately £40bn.
With the general consensus amongst economists that this will be the last time that the Bank of England holds base rate at 5.25% and inflation slowly but surely heading towards the government’s 2% target, it is looking likely that mortgage pricing will come down during the year.
This makes remortgaging more of an attractive option than it would have been for borrowers refinancing last year, when high rates lead to affordability issues, resulting in an 11% increase in internal product transfers.
In addition to BTL house purchases, a falling cost of borrowing and improving weather could see an uptick in those looking to finance work to improve the overall standard or energy efficiency of their portfolios.
And while a resurgence of the remortgage market is good news for brokers, it’s not to say that there’s no place in today’s market for product transfers, because they can be a great option for those wanting pound-for-pound borrowing.
Keeping in regular contact with landlords will give brokers foresight into when these opportunities will arise and also provide brokers with an understanding of their clients’ portfolio strategies, which in turn helps in sourcing the most appropriate products and resourcing accordingly.
