Kent and south-east London landlords and those considering entering the buy-to-let market will be encouraged to learn that mortgage lenders are demonstrating increasing confidence in the sector, with the range of products available steadily growing.
It hardly needs saying that the Covid-19 pandemic impacted confidence in the sector and, with the country in lockdown and the economic impact of the health crisis unknown, lenders displayed understandable caution.
The long-term impact of the pandemic remains uncertain, its impact likely to vary by sector. However, a basic truism exists that people will always need to live somewhere and those unable or unwilling to buy, especially in uncertain times, will require rental accommodation.
This need is reflected in the way that buy-to-let products have shown encouraging signs of recovery.
As of late June 2020, there were 280 more products than were available at the start of May, a time when confidence was at its absolute lowest.
For any landlord or potential landlord, the increased product range is of course welcome, with extra products available at 75% and 80% loan to value - there are options for both two and five-year fixed terms at both LTV rates. Even at the 80% LTV ratio, traditionally a rate with fewer options available, there were close to 50 new products from which to choose.
It is worth noting that the average interest rate on these fixed-term mortgages has increased slightly, although this is likely to be a result of there being more products, including some with high interest rates, available. Regardless of the average rate, there are more competitive options available than was the case in May.
A quick search on a comparison site such as money.co.uk highlights this increased choice - in fact it is likely that by the time you read this post the range of products will have grown further still. The numbers in Moneyfacts’ survey were from before a partial Stamp Duty holiday until March 2021 was announced (we will focus on the importance of these changes on the south-east property market in a future post).
However, beyond the number of products available, the importance of this expansion of choice lies in the fact it shows lender confidence. The banks and other lenders are able to expand their range of products only because they have confidence in the housing sector, and, specifically, buy-to-let sector’s inherent strength.
An example of this confidence is demonstrated by Jeff Knight, a director at Foundation Home Loans, who told the Financial Reporter site: “Like many lenders, we re-entered the buy-to-let market cautiously but are now in a position to up our maximum LTV levels, cut some of our product pricing, broaden our criteria and introduce new products.
“We believe this will provide a greater degree of flexibility for landlords whose circumstances may well change over the next 12 months.”
This cautious optimism is found across lenders, another example being Steve Cox of Fleet Mortgages, who told Mortgage Introducer: “The capital markets are not yet near a ‘business as usual’ position as this can’t be a light switch that we can turn on, even with the housing market reopening.
“Our appetite for lending is still going to be subdued, but slowly climbing.”
Real world data backs up this confidence, Paragon Bank reporting a surge in buy-to-let mortgage intermediaries visiting its online portal and a 75% increase in completed applications when comparing the height of the lockdown and then a couple of weeks later.
Their mortgage sales director Moray Hulme makes an interesting point, that uncertainty in the market overall could lead to many choosing to rent rather than buy at this time.
”Demand for private rented property remains strong and we expect it to strengthen further as potential homebuyers wait to see how the next few months pan out and rent instead,” she told the PropertyInvestor site.
For landlords in Kent and south-east London this is encouraging news, especially when coupled with the Stamp Duty changes which remove this levy on properties up to £500,000 in value (though the 3% surcharge on buy-to-let investments remains).
The average house price in Kent was £320,000 as of June 2020, and above £450,000 in south-east London - the Stamp Duty savings where applicable therefore running to a five-figure sum.
It is to be hoped that the recovery may now be self-fulfilling - lenders have displayed increased confidence while the measures from the Treasury are likely to encourage greater numbers to invest in property.