Why we’re backing Buy-to-Let now
Written by Luke Stevenson
See our new Buy-to-Let rates and products here.
By Sophie Mitchell-Charman, Commercial Director, LendInvest
It feels like a long time ago when people kept saying everything would be back to normal in 6 months?
Can’t quite put my finger on when I first heard it, but it was definitely at least 6 months ago.
A lot of bold statements have been made about the Buy-to-Let market in the past year, and we ourselves have contributed; loudly declaring at the start of June that Buy-to-Let was back, before the market then proceeded to have another – shall we say – choppy few weeks after.
Despite these challenges however, we’re still ready to back the brokers, landlords and the Buy-to-Let market with the new range we launched last month.
Backed with our new £500m partnership with Chetwood Financial it is a statement of intent for where we see the Buy-to-Let market going in the back end of 2023. Here’s why we’re doing it.
A ‘new normal’
I’ve said this a few times now, but when you look at the history of interest rates, the last 14 years have been an anomaly.
There’s a reason they are referred to as ‘historically low’ rates, and while we should expect some normalisation, we cannot and should not expect rates to return to the 0.1%s we’ve enjoyed.
So what does that mean for property investors, brokers and their Buy-to-Let landlord clients?
For some, it is a reason to tap out of the market. Which we understand, and we know there is data supporting this with more homes on the sales market made up of former lets, and anecdotally brokers telling us of landlords coming in and asking for their portfolios to be sold.
This isn’t, however, an end of days moment. It is a natural churn that happens in any market turbulence.
Crucially though, investing in the property market is a long-term investment – which the Renters Reform Bill looks set to make an even bigger priority – and rather than being left to their own devices, we want to help brokers lead their clients through this into the new normal.
The advantages offered to landlords
The greatest pressure mortgage interest rates have applied is to the homeowner market, where higher interest rates have put pressure on the higher LTIs needed over the past 10 years to support homeowners.
For asset or capital-supported Buy-to-Let landlords, re-entering the market to grow their portfolios should be more simple than the homeowner market, especially with lower rates ready to support them.
Leveraging across their portfolio to invest in new properties is simple, the change might need to be the level of capital they raise to ensure lower LTVs on newer properties if they want to keep rates even lower.
Obviously this comes with risks as all property investing does, but the work landlords did over the past decade should place them well to diversify that risk across their properties.
Understanding market needs
What else needs to be considered in this ‘new normal’ is the type of properties that work for both tenants and landlords.
Rental demand is at an all-time high, and the greater focus on rental properties through the Renters Reform Bill is putting a premium on high-quality properties, tenants can make a long-term home.
How can landlords balance these needs, with the need for the right yields?
- Maximising potential
Larger HMOs and MUFBs have a crucial role to play in the new normal, both in ensuring the need for rooms is met, and in allowing landlords to maximise yields but spread it across their property so as to not pass on increased rates to tenants.
Investing to refurbish or reconfigure homes along these lines could be a key part of the new landscape.
- Investing in existing properties
EPC requirements, Renters Reform Bill and increased rents:- all reasons for landlords to spend time investing in their existing property to make sure they can build properties for the long-term that their tenants see value in.
Longer-term renting is going to be a big feature of the post-reform bill era, and landlords need to be prepared for it.
Whatever the new normal looks like, one thing we’re convinced of is it is time to stop putting it off and make it happen; and we’re going to back brokers and landlords every step of the way.