Buy-to-let landlords keep benefiting affordability

Buy-to-let affordability is improving thanks to greater loan sizes

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.

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

aerial-view-uk-houses

STAY AHEAD OF THE MARKET

Sign-up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
UK holiday let

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT