The buy to let landscape – What does this mean for professional landlords?

The Bank of England Base Rate

The recent spate of base rate increases from the Bank of England has already been seen in the wider mortgage market. Although the specialist lenders were able to hold off from withdrawing products as quickly as the high street banks, an impact is now being seen throughout the industry.

Anyone who has a mortgage will of course be worried by the current market conditions, and professional landlords who have many properties mortgaged will be especially concerned. The harsh reality for landlords is that mortgage rates are just another cost of doing business, and when considering any future investment, the uncertainty may give them reason to pause. Will BTL landlords pass on this cost to tenants? Only time will tell.

For any landlords with HMO properties (typically student lets)

They will be pairing these additional mortgage costs with the huge increase in utility bills (usually included in the tenancy agreement). Unfortunately, this is again another by-product of this business and the end consumer - the tenant - is likely to foot the bill again.

Letting Agents are also having varying experiences so far; Anthony Sargent of ‘Fish Need Water’, a letting agent based in London, reported that a significant number of his landlords have decided to sell. On the flip side of this Chris Jones of Jones and Co, a relatively new business and as such their clients are predominantly new landlords, have seen no increase in landlords offloading property.

According to the Office of National Statistics (ONS), private rental price increased 2% in the last year to January 2022 in the UK. This was slightly up from 1.8% the previous year. East Midlands had the biggest increase of 3.6%, while London saw the lowest at 0.1%. Interestingly, according to SpareRooms Rental Index, the first quarter of 2022 saw rents rise by 4% when compared to the same period last year, and a 6% increase year on year since 2019 (excluding the capital).

With a significant portion of our landlords having spent 30+ years investing in property, serious considerations are being made whether to begin selling off some, or all of their portfolio. When you look at the increased mortgages rates and cost of living as a whole, now may be the time to take advantage of current house price records. Rightmove’s latest HPI shows an average asking price of £360,101 - another record high for the third consecutive month.

The location of property will play a major role in the decision process, major UK cities are seeing slower growth in rental income and lower demand for private rental property. Despite this, other towns and cities are seeing rent rises, and where landlords are still in the infancy of their investment journey these factors could also play a pivotal part of the decision making process.

We are advising all property owners

Not just buy to let landlords whose initial terms is coming to an end in the next 12 – 18 months, to seriously consider their position. No one can say for certain where the interest rates will be in 1 – 2 years’ time. Remember there is no cost to weigh up your options; look at your ERC (early repayment charge),and then look at various scenarios including remortgaging early and the possible advantages and disadvantages. What would an extra 1% or 2% on your mortgage rate look like to you? This could very much be the reality if you waited until the end of your term and mortgage rates have continued to rise. It might be worth considering the benefits of securing a 5 or even 10 year fixed rate so that you can forecast your finances more accurately.

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