Further BoE rate rises, green mortgages and heightened lending on cards for 2022 – Brett

by: Paul Brett, managing director, intermediaries, Landbay
  • 13/01/2022
  • 0
Further BoE rate rises, green mortgages and heightened lending on cards for 2022 – Brett
Predictions are never easy but educated guesses at what may be in store for 2022 is something I can try to do.

Let’s start with interest rates. The onset of Covid led the Bank of England to decrease base rate twice in March 2020. Firstly from 0.75 per cent to 0.25 per cent on 11 March, quickly followed on 19 March to the lowest ever rate of 0.1 per cent.

The rate increased to 0.25 per cent in December 2021, but it is unusual for the base rate to go up in the run up to Christmas. It has only happened once before and that was in December 1994.

But now that inflation has risen to 5.1 per cent – and the last time it was that high was almost three decades ago in May 1992 – the Bank decided it had to act.

The Bank is also forecasting inflation will rise to six per cent so to bring it down, interest rates are likely to go up again in 2022.

Landbay’s chief executive John Goodall, who is an economist, expects there will be another two 0.25 per cent increases taking the rate up to 0.75 per cent by the end of the year.

Many borrowers will be unaffected by any rise in base rate as they are on fixed rates but those who have variable rate products will see small increases.

New lenders are set to join the market, including in the buy-to-let (BTL) space, so it will get even more competitive, not just on price but on criteria and product innovation.

Green mortgages and grants

A few BTL lenders introduced green mortgages last year and I anticipate more will follow, I do hope so. As an industry, lenders should help to encourage landlords and homeowners to upgrade their properties to a higher EPC rating if they can.

I also hope we will hear more from the government about the proposed changes for landlords being allowed to only let properties with an EPC rating of C or above. Landlords need to know where they stand on this as it has huge implications with 65% of housing stock rated D to G on carbon dioxide emissions.

What might help here is the Boiler Upgrade System (BUS) which is being introduced in April 2022. Homeowners, small landlords and private landlords will be able to apply for a government grant to replace gas boilers.

The grant will go towards installing environmentally friendly sources of energy. This scheme consists of a £5,000 grant towards an air source heat pump or biomass boiler in rural areas, and £6,000 towards a ground source heat pump.

New products and BTL lending

We will also see lenders venturing into new product areas in 2022 and as rates start to rise I think we will see more longer fixed rates coming into the market, including BTL.

BTL was very strong in 2021 reaching £18bn for house purchase lending. This was the second highest annual figure after the £23.1bn peak of the heady days of 2007 before the global finance crisis hit.

I’m not going to put a figure on 2022 lending stats but I think BTL will continue apace with more professional landlords expanding their portfolios.

SME property developers have been refurbishing houses in multiple occupation (HMO), particularly in the cities since lockdown was lifted last summer. People returned to their offices and the student market is good for property investors.

I expect to see more landlords, including first-time landlords, buying up HMOs as the rental yields are more attractive than single units.

House prices, technology and ESG

House price growth will be slower than last year’s booming market, which was fuelled by the stamp duty holiday, but will remain fairly buoyant. Demand for property purchase still heavily outstrips supply.

Technology will continue to evolve and we will see more innovations during 2022 particular for improving the broker and customer journey.

More firms will embark on creating or improving their Environmental, Social, and Governance (ESG) policies, concentrating on their environmental impact such as becoming carbon neutral.


The Covid-19 situation is still very worrying and now that Omicron has taken over as the dominant variant, we have with more restrictions imposed on us. Will there be more lockdowns? I hope not but I won’t hold my breath.

There will no doubt be other mutations of Covid-19 and it seems as if we have no choice but to get used to it and accept that it is a defining part of the 2020s. We can only hope that as the virus carries on mutating it gets weaker and becomes less dangerous to people’s health and lives.

So on that wishful note I bid you all a healthy, happy and prosperous 2022.

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