Affordability across all parts of the housing market became more stretched in 2022, but in the buy-to-let sector lenders are now offering a greater array of options to landlords.
After a period of skyrocketing house prices in the UK, which was spurred on in part by a post-pandemic flurry of activity and changes in circumstances for many people, things have been stabilising over recent months.
Most forecasters predicted such an outcome, with many stating that the previous rate of growth was neither sustainable nor desirable for the UK housing market as a whole.
However, in the aftermath of the mini-budget and rising inflation levels, mortgage affordability dropped for both homebuyers and property investors towards the end of last year. Lenders reduced the loan sizes they were willing to offer, while interest rates ramped up over the space of a few months.
According to data from Mortgage Broker Tools, November 2022 saw buy-to-let affordability specifically fall to its lowest level in their records. It reported that 19% of enquiries had failed to find a lender who would provide them with their desired loan size.
This meant a growing disparity between high house prices and the mortgages available to buy them. Yet the latest research from Mortgage Broker Tools shows that the situation has been greatly alleviated since then, with improvements to affordability levels opening up the market to mortgaged property investors and landlords.
More affordability for investors
The majority of mortgage holders across the UK, whether homeowners or portfolio landlords, will notice a difference when they come to remortgage or buy a new property with a loan. While mortgage interest rates are still at low levels historically, the ultra-low interest rate environment pre-2022 is no more.
Rising interest rates can have a big impact on stress tests, where lenders assess the affordability and the buyer’s ability to pay back the loan should interest rates rise again. This is what made the market more difficult for buy-to-let landlords towards the end of last year.
But the improvement in affordability is apparent in the statistics, as Mortgage Broker Tools reported that only 10% of buy-to-let enquiries were deemed to be ‘unaffordable’ by lenders, and the loan amount rejected.
In a sign of a revival of appetite among property investors in the new year, the company noted that it had received a record number of buy-to-let mortgage enquiries in January. This was across a whole range of client types, from first-time landlords to those considering variable rate products.
At present, lenders across the board are reducing rates, adding new buy-to-let products and options, and offering greater incentives as well as loan sizes to buyers. Investors from overseas, including expats and foreign nationals, are also seeing a greater range of products available to them from UK lenders.
As confidence returns once more to the ever-resilient UK housing market, it seems there is still strong demand among buyers, which is expected to prevent house prices from slipping too far in many locations. Some areas may not see any house price falls at all, as supply levels remain lower than those demanding properties.
Buy-to-let has ‘bounced back’
Mortgage Broker Tools chief executive Tanya Toumadj says: “The last quarter of 2022 was a tough time for BTL investors, as rate rises significantly impacted stress tests and the loan sizes available contracted considerably.
“However, BTL has bounced back and the situation has improved quickly. Competition has returned to the market, lenders are now starting to cut rates and many are offering more achievable stress testing.
“We have also seen record demand for BTL mortgage enquiries at Mortgage Broker Tools in January, and so the outlook for brokers is much brighter than it was just a few months ago.”
At BuyAssociation, interest in the UK property investment space remains extremely strong. Browse some of our latest projects, or get in touch today to find out how we help property investors to achieve their long-term goals.