Landlord Finance Update: Better Rates, Bigger Questions
After months of rising costs and shrinking margins, landlords may finally be seeing a shift. This month’s update explores falling mortgage rates, more competitive lending, and what it all means for your portfolio.
BTL rates drop: a glimmer of relief for landlords?
For the first time in what feels like a long time, buy to let mortgage interest rates have steadily decreased. While the reductions have been modest, they are certainly starting to ease the pressure on those of you who need finance and are trying to protect profits.
As rates come down, we’ve seen other positive shifts in the BTL mortgage market. Many lenders have reviewed rent-to-interest (RTI) calculations, making them less onerous and, therefore, easier to secure, especially for properties with lower or below-market-value rents.
We’ve also seen more lenders move into the 80-85% LTV space, which is always a strong indicator that lenders are confident in property prices increasing over the next few years.
So far, so positive.
However, a recent report found that BTL investment made up just 10% of the property purchases in January to April, the lowest proportion since 2007. Unfortunately, this is a real cause for concern.
It’s well known that demand for rental properties far outstrips supply, and it has done so for several years now. The legislative and economic climates around landlords mean many of us are reluctant (or unable) to invest in more properties. Furthermore, many are disposing of low-yielding properties or exiting the market altogether. Ultimately, it’s tenants, and often the most vulnerable, who suffer. Yet these points seem to fall on deaf ears in the corridors of power.
Buy to let mortgages: more options, better deals
As mentioned, buy to let mortgage rates are coming down to more manageable levels, and there is more competition in the lender market – excellent news for landlords!
The availability of better RTI calculations means that those of you who were stuck with only a Product Transfer as a refinance option may now have access to more cost-effective rates. It also means capital raising is more viable, which is excellent news for anyone wanting to purchase new or renovate existing property.
What’s driving the market shift?
While President Trump’s tariff saga negatively impacted almost everything else, it initially positively impacted the mortgage market. SWAP rates (the rates that strongly influence the cost of mortgages) decreased faster than we’ve seen in a while, and we saw a host of lenders price down.
However, the recent news that UK inflation increased to 3.5% in April from 2.6% has pushed SWAP rates up slightly. As ever, the money markets remain a little volatile, although considerably calmer than in recent years.
What should you be doing right now?
Review your mortgages. Do you have remortgages coming up, or are you looking to raise funds for refurbishment or EPC updates? There’s no better time than the present to examine your portfolio to ensure it’s performing as well as it can.
Diversification. Different property types offer different benefits, and those like HMOs typically generate higher yields than standard vanilla homes. Maybe now is your time to venture into semi-commercial property. With less Stamp Duty to pay and high yields, many landlords add these properties to their portfolios to ensure profits.
Stay informed. The mortgage market changes quickly, and new opportunities arise as often as others disappear.
Your key takeaways:
→ BTL mortgage rates are easing slightly
→ Lenders are relaxing RTI calculations and increasing LTV offerings
→ BTL investment is at its lowest since 2007
→ Now is a good time to review your portfolio and consider diversification
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