Looking to the market ahead
Jeff Knight is director of marketing at Foundation Home Loans
UK Finance has now released its final lending figures for both December last year and therefore 2019 as a whole, and if the end of the last 12-month period has translated itself into 2020, then it seems likely we are destined for a positive year ahead.
Specifically looking at the buy-to-let market in 2019, gross mortgage lending was actually slightly down on 2018, clocking in at £39.5bn, compared to £40.5bn, however as December figures show, the trend is upwards.
The number of new home purchase mortgages completed in December last year (5,700) was up 3.6% on December 2018, while remortgage completions were up 2.3% to 13,300 over the same period. Translated into gross lending, purchases were the same at £0.8bn, while remortgages were up to £2.2bn (from £2.1bn).
And, if we are to judge the market against our own activity in the first two months of this year, then the likelihood is that buy-to-let loans and lending will continue on an upwards trajectory, at least for the short-term and perhaps further if we get any good news out of March’s Budget announcement.
Might we get a stamp duty cut for additional property purchases? Might we get some rolling back of the mortgage interest tax relief changes? There is probably more chance of the former than the latter, if only because key players in this new Government signalled stamp duty changes last year, at least in the residential space, and they might also think that those very same measures impacted the private rental sector too much.
A stamp duty cut for additional property purchasing would undoubtedly give the buy-to-let market another boost, and it would not be surprising to see a significant upturn in activity following it. Especially for higher-yielding properties and in higher-yielding regions of the country – currently regions in the North appear to be outperforming their Southern counterparts by some distance.
The news, across the board, however, is not completely positive. I’ve seen some recent data from Hamptons International which effectively shows a drop in both the number of private rental sector landlords and properties over the course of the last two years. It says this is mostly due to amateur landlords not being able to run profitable rental properties and selling up.
This drop in PRS supply, against a backdrop of sustained demand, was always going to be a likely outcome of the changes and, as many predicted, it is rental costs that have gone up in order to cover these and ensure that landlords (where possible) can sustain profitability.
This situation however does provide opportunities, particularly for more established landlord players, and coupled with increases in house prices and a hugely-competitive mortgage market for landlords, it does mean that we could see more and more professional players looking to refinance and add to portfolios.
The requirements for advice by these individuals, especially if they are utilising limited company vehicles, leveraging existing properties through refinancing, and seeking to provide more multi-tenant properties, are clear and obvious. Advisers are also in a strong position here because their access to finance across all these areas and many more is strong.
Lenders like Foundation have created product options and shifted criteria to help landlords in all kinds of situations, looking for different types of rental properties, and wanting to supply property for all types of tenants.
It is therefore a good time for property investment and a good time to be delivering advice to these individuals and the means by which they invest. Options abound, and the attractiveness of the buy-to-let/PRS looks set to remain strong – make sure you’re working with lenders who can support the diverse needs of your client base and can provide quality mortgages and services in order that you (and they) can make the most of any continued upturn.