Lenders still adopting a conservative approach
John Phillips is financial services director at Kinleigh Folkard & Hayward
Even with a more focused approach to building new homes in the UK and more support for first-time buyers with small deposits, the private rental sector must still work hard to if we are to fill the housing gap. While the market needs new landlords, it is the professional landlords who are perhaps most likely to add to their portfolios over the course of the year and lenders may need to change their policies slightly if they are to be supported in their endeavours.
While yields are good though not stellar, the landscape is favouring established landlords. Countrywide’s December’s monthly index showed house price increases outstripped average rent rises during 2013, suggesting landlords’ yields – rental income relative to property value – were being squeezed. They were not alone. Paragon said its average customer enjoyed a yield of 6% in November 2013, down from 6.7% a year before.
However The Office for Budget Responsibility now predicts house prices to rise 27% by 2018. Landlords are expected to rapidly grow their borrowing to expand. The demand for rental property shows little sign of waning at the top end. Lenders are catching up somewhat but large exposures to big portfolios still trouble them.
To go by most products out there, lenders are still not over keen to provide for professional landlords generally who have a significant number of properties already.
As lenders slowly raise the number of properties buy-to-let borrowers can have, they are adopting a conservative approach. Moving from three to seven for example is no sign of an appetite for marketing products at professionals.
This market offers intermediaries a huge opportunity. Advisers are best placed to work with such professionals in order to secure the finance they need. Those that have the skills and service to support professional landlords with portfolios of ten properties or more are poised to do well.