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Buy-to-let mortgage market activity set to surge in 2022

The buy-to-let mortgage sector has continued to expand over recent years, and the up-coming 12 months could see remortgaging in the space hit new highs. 

Fierce competition across the UK’s rental sector is pushing rental prices up, as demand for homes remains higher than the amount of stock available. As a result, many landlords will be looking to maximise their existing portfolios, or expand them in the year ahead.

Paragon Bank has also pointed out another significant factor that could boost the buy-to-let mortgage market in 2022. The year marks the five-year anniversary of the Prudential Regulation Authority’s updated underwriting standards, brought in in 2017. The new rules meant that huge numbers of property investors chose to lock into longer-term deals, many of which will now be coming to the end of their terms.

A recent report from Shawbrook Bank shows that 34% of landlords plan to buy at least one more property in 2022, and many are likely to use borrowing to add to their portfolios.

A busy year ahead

According to Paragon, there were 4,167 five-year fixed rate mortgages taken out in January 2017, compared to 3,008 taken out in December 2016. Then, between January 2017 and January 2018, 10,717 of these mortgages were written.

Moray Hulme, Paragon Bank mortgage sales director, said: “Five years ago, the PRA introduced new underwriting standards that required lenders to take a more holistic approach to assessing mortgage affordability.

“This correlates with 2017 seeing a significant increase in the volume of mortgages fixed over five years. As a result, we’re anticipating strong levels of remortgage business throughout the next year.

“This presents a fantastic opportunity for brokers to generate business and, with the process often involving additional borrowing, we recommend that they do this at the earliest opportunity.”

Will buy-to-let mortgage market go green?

Another prediction for 2022 set out by Paragon Bank is the increase in green offerings for landlords. The lender itself launched a green mortgage specifically for the buy-to-let mortgage space in 2021, and hopes others will follow suit.

Commenting, director of mortgages Richard Rowntree said: “A key highlight for me during the year was the launch of our green proposition. Upgrading the energy efficiency of the private rented sector will be a difficult challenge, but one Paragon is committed to playing a role in. We will continue to innovate in this space to help our customers invest in more energy efficient homes, as well as upgrade existing stock.”

The government has already brought in minimum EPC requirements in the private rental sector, with E being the lowest acceptable EPC score in a rental home. In the coming years, the threshold will be raised to D or C, and even higher as the government strives to meet its net zero targets. Lenders and landlords alike will need to be ready for this change.

Supply and demand in 2022

While there has been huge pressure on housing supply over this past year, Paragon Bank believes the pandemic is only a contributing factor rather than the sole cause. In the private rented sector, the lender believes the government will need to step in to make the market more appealing to private investors to prevent supply falling further.

They could do this by getting rid of fiscal and regulatory barriers that are an obstacle for many. This would, of course, need to be balanced with protecting tenants.

Paragon Bank adds that the way people live and work now means people have reassessed what they need from their homes, and will continue to do so. Tenant demand will remain strong in 2022, but with more people than ever working remotely, priorities might have changed.

BuyAssociation helps property investors find the best opportunities across the UK, tailored to their needs. Browse some of our available properties here, and get in touch for more details. 

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