"This downturn, a result of rising interest rates, economic uncertainty, greater property costs, has shaped an increasingly cautious outlook among landlords."
There’s no doubting the buy-to-let market is navigating some fairly turbulent waters at present, with the latest Q1 2024 figures from UK Finance revealing a significant drop in buy-to-let mortgage approvals for the first time.
This downturn, a result of rising interest rates, economic uncertainty, greater property costs, has shaped an increasingly cautious outlook among landlords.
However, the legislative measures introduced in the King's Speech 2024 might well offer a more positive route through the turbulence for landlords, and at the same time, present mortgage advisers with an opportunity to guide these borrowers through the market opportunities and threats.
The Government’s commitment to build 1.5 million new homes over the next five years is a pivotal move. This ambitious target, underpinned by reforms to streamline the planning process, aims to bolster housing supply substantially.
For the buy-to-let market, this could translate into increased opportunities for landlords to invest in new properties. At the same time, we do know the new Government is prioritising local people getting onto the property ladder, and therefore it’s difficult to say how many of these newly-built properties will be available for landlords/rental purposes.
But, if the supply is opened up for the private rental sector (PRS), then there could be opportunities. Moreover, the Government's focus on faster approval times for new developments and enhanced public infrastructure investment is designed to make new housing projects more efficient and appealing to investors.
At the same time, we have the Leasehold and Commonhold Reform Bill, which is set to simplify ground rents and improve the commonhold ownership framework. By making these ownership models more transparent and straightforward, the Bill could attract more investors to the buy-to-let market, especially those previously deterred by the complexities of leasehold.
The English Devolution Bill, which grants more control to local authorities over housing policies, could yield region-specific incentives and regulations favourable to landlords. By allowing regions to tailor policies to local needs, this measure could result in more effective housing initiatives and potentially increase property values, thereby attracting more investment in the buy-to-let sector.
The Renters’ Rights Bill, despite its initial appearance as a deterrent for landlords, aims to improve tenant protections, including the abolition of no-fault evictions. By promoting stability in the rental market, these measures could reduce vacancy rates and ensure a more reliable income stream for landlords. This stability is crucial for those looking to secure long-term investments.
In this evolving landscape, mortgage advisers clearly have a critical role in supporting landlord borrowers, many of whom face mortgage maturities in the next six to twelve months.
Advisers can proactively assist landlords in refinancing and remortgaging to secure better terms, conducting thorough market analysis to find competitive rates and flexible mortgage products that align with their long-term investment strategies.
Addressing landlords' insurance needs is also paramount and can deliver a strong ancillary income stream. Comprehensive coverage, including property, liability, and rent guarantee insurance, helps mitigate the risks associated with property investments.
Furthermore, given those legislative changes, efficient conveyancing services are more critical than ever. Mortgage advisers should collaborate with reliable, specialist conveyancing firms, via platforms such as Broker Conveyancing, to help streamline property transaction times and ensure clients have access to conveyancers who understand the more complex arrangements that can come with property investment.
In recent years, there has been a growing trend of landlord borrowers seeking higher-yielding properties, such as HMOs or multi-unit blocks, or short-term/holiday lets and the like, and these are often more complex transactions to process. Plus, many landlords also have complex arrangements themselves, in terms of both their portfolio, their tax affairs, and how they are utilising equity, etc, in order to purchase/refinance properties.
It's clear, in that regard, that these landlord borrowers require conveyancers who fully understand the property investment market, and the potential complications that can arise. We’ve seen this most recently in terms of leasehold, but also in terms of the Building Safety Act, and again landlord borrowers may need to be pointed in the right conveyancing direction in order to get the quality of service and knowledge to be able to process these cases.
Advisers can clearly support these needs by grasping the nettle with regard to landlord borrowers’ conveyancing requirements, and using Broker Conveyancing to source a firm that can undertake all these activities. Of course, the same applies in the residential space, particularly for first-time buyers, who might be completely unaware of what they require, conveyancer-wise.
Mortgage advisers can therefore be pivotal in helping landlord – and all - borrowers navigate this marketplace, offering comprehensive support, and taking a key service need away from the borrower, by helping place them with a specialist conveyancer who understands the case, its potential complexities, and who can still get them through to completion well within timescale.
It’s an opportunity that shouldn’t be missed – either from a service or an income point of view.
