It’s why I tend to keep my predictions to a minimum but looking ahead to 2022, particularly within the buy-to-let (BTL) market, I can only feel incredibly positive about the market and specifically our place within it.
Over the last year and a half there has been a real focus on purchase activity amongst landlords; understandably with the stamp duty holiday having been surprisingly open to them.
It’s unlikely we’ll see the level of purchase activity in 2022 that we saw in 2021 but this doesn’t mean landlords aren’t going to be adding to portfolios, or indeed new landlords coming into the sector buying for the first time.
‘Strong activity’ for lenders and brokers
The fundamentals of our sector next year are likely to be based around remortgage and refinance business – there are a lot of deals coming to maturity, and landlords will be seeking to use increased equity levels in order to fund future purchasing. In that sense, we should see strong activity for advisers in the BTL space.
And for lenders too. However, there is a caveat here and that comes in the form of the competition that exists. A number of new lenders entered the BTL space last year, and more are likely to follow, however the more that enter, the harder it becomes to make a success of a start-up.
I’ve said it before, but it’s worth repeating, I would not relish starting a lender up today unless I could draw upon a serious and significant cost of funds advantage in order to propel my product offering and to differentiate me from the other players. ‘Me Too’ just isn’t going to cut it.
There is a sense that some lenders who have struggled to make profits within the BTL market in recent years might finally come to the end of their lending journey, so any new entrant is going to need to find their sweet spot very quickly.
That’s especially the case in a market where established players like ourselves have many bases covered, have the firepower to achieve significant levels of business and are also benefiting from funding that makes the products highly competitive. Advisers and clients will continue to benefit from the competition but it remains very important to choose your lender partner wisely.
EPC and energy performance
The EPC/energy performance issue will also be vitally important in the BTL space next year. From my perspective, it offers opportunities for landlords to improve the quality of the rental accommodation they offer, and that can only be good news.
For lenders and advisers too, it represents a strong business opportunity for those who truly understand the specialist sector, and who can support landlords in what they may need to achieve EPC-wise for their properties. This is going to be a core consideration for landlords from now on, so it’s important we all do everything we can to ensure their properties meet the required standards.
Overall, this is a changing environment for BTL and it will be those that can adapt who will thrive. Those that don’t, will I’m afraid continue to struggle.