The Lending Lowdown: Will 2022 be a vintage year for BTL?Wednesday, March 30, 2022
On paper, now is a great time to be a residential landlord. More people are looking to rent property than there are homes available, pushing rents and values to record highs. That should mean good business for brokers, with landlords looking to grow portfolios, or remortgage to get the most out of their investments.
Swings and roundabout
Sadly, it’s not quite as simple as high demand = big profits. Inflation, rising interest rates and the cost of meeting new environmental standards are all putting pressure on landlords, many of whom took a hit during the pandemic, when many tenants struggled to keep up with rent payments.
Overall though, we think there are more opportunities than hurdles out there. The glass is at least half full, and here’s why:
According to Hometrack’s rental report for Q3 2021, the availability of homes to let was 43% below a five-year average, while demand was 55% above average for the same period. Unsurprisingly, rental inflation has reached a 13-year high.
Meanwhile, many landlords have been enjoying longer-term fixed deals for the past few years. With 2022 marking the five-year anniversary of the PRA’s updated underwriting standards, a lot of those deals will be coming to an end. Which means demand for remortgage products should be significant.
While landlords always need to budget for wear-and-tear, they may now face big bills for greening up. By 2025, any property let for a new tenancy will need an EPC rating of A to C, with all rented properties - new or old - having to make the grade three years later. That’s a lot of new boilers, double-glazing and insulation. For many landlords - particularly those with multiple properties - this isn’t going to come cheap
A recent survey suggested that more than half of landlords lost income during the pandemic, and about a fifth have thought about getting out of the game. However, despite strong property values, tax implications mean that selling up could be a bad strategy. Landlords risk ROI if they decide to sell in a hurry - and that should fuel even more demand for remortgages.
What this all means for your customers
With both rent and values soaring, landlords will continue to invest, but we don’t expect purchase activity to be as brisk as last year.
Remortgages, however, will offer a fantastic business opportunity. We know there was a massive increase in the number of five-year fixed-rate mortgages written between 2016 and 2018. These will be maturing just as the Bank of England is likely to raise interest rates - possibly in a series of hikes throughout 2022. Savvy borrowers will want to lock-in new fixed-term loans soon.
We may also see landlords hoping to borrow to invest in more energy-efficient measures, bringing their properties up to the required EPC ratings due to become law in 2025 and 2028.
What you can do to help….
By engaging early with your known BTL clients, you can help them make sound decisions about their financial and portfolio planning. You could also welcome new landlords onto your books, particularly if you can offer competitive fixed-term remortgage products.
…and how we come into the picture.
We’re fully geared up for portfolio landlords, with a dedicated team, a special multi-loan product, and no cap on property numbers. For limited companies and SPVs, we’ll accept up to four directors or shareholders. And unlike a lot of lenders out there, we’re happy to consider HMOs, MUBs, holiday and short term let properties, student flats and corporate lets.
Get ready for the surge
All the conditions suggest there’s going to be a surge in demand for our products, particularly for remortgage deals. So talk to your BTL clients, and let them know what we can do for them. And give us a call - because we’re always keen to do More for Lets.
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