Bob Young is managing director of CHL Mortgages
While the economic mood in the UK at present can best be described as uncertain, particular pockets of the financial services industry are revelling in optimism and the mortgage industry itself is home to some of these satisfied sectors.
The bridging market, if you believe the noise, has been a strong performer and the buy-to-let arena has certainly seen a great deal of activity in the past 12 months. Our latest Landlord Survey has captured the mood among property investors and the overwhelming sentiment is they are happy with their lot and optimistic about the prospects for the sector in the coming months.
An encouraging 71% of respondents to the survey said they were sanguine about how the buy-to-let market will fare in the next year or so, up 4% from the equivalent poll in 2011. Just 5% of landlords are harbouring negative thoughts proving that the private rental sector is a good place to be at present. Landlords aren’t sitting on their hands either with 32% planning to expand their investment portfolio by 2013 and 60% having undertaken some kind of refurbishment or enhancements to their existing properties. The reasons for this soon become apparent with 41% of respondents reporting an increase in tenant demand over the past six months and 54% claiming it has stabilised at a strong level.
Despite this optimism, landlords aren’t getting carried away and a number of them are keeping a firm eye on the Bank of England’s monthly meetings and, perhaps more importantly, the ongoing rate-setting committees of their existing lenders. Two-thirds of those polled still regard their buy-to-let investment portfolio as a stable, resilient concern, but 28% claim that a significant change in their interest rate could leave them vulnerable.
It is not just concerns over rate levels that are instilling caution in landlords either, with many deterred from expanding their portfolios by the lack of finance available as lenders continue to struggle to access funding lines. While it would be nice if landlords were free to grow their stable of properties unchecked, many have learned harsh lessons from the property slump we are only just beginning to emerge from, and if a more sensible approach is being adopted this time round then it can only benefit the entire industry.
Although landlords admitted to having some concerns about future interest rate increases, the vast majority are still willing to look at other product opportunities. One of the survey questions asked whether respondents would be willing to accept a hypothetical offer of a five-year fixed-rate mortgage at 5% to replace their existing tracker rate and just 16% opted for the security of immovable repayments compared to 76% who would stay put.
When quizzed on whether they were overpaying on their borrowings while the market was healthy, just 17% said they were while 80% admitted they weren’t. This would seem to suggest that while landlords are displaying some degree of caution as previously mentioned, they aren’t yet at the point where they are being proactive about it which would suggest they see the market as set fair for the time being.
All things considered then, buy-to-let landlords remain optimistic but with a degree of caution – the good news from the survey is they aren’t getting ahead of themselves which is a sensible approach to adopt. There may well be some slight obstacles in the road should we say significant and cross-market interest rate rises, but for the time being it is very much a positive ‘business as usual’ for buy-to-let.