There’s been a lot of big blows to the rental sector over the past few years and property experts have predicted that landlords with portfolios of one to four properties will feel the squeeze the most.
The culmination of tax relief changes, increased stamp duty fees and tighter lending restrictions, have reduced the amount that landlords can borrow and also started to hit their back pockets. Ingard witnessed a decrease in buy to let applications in quarter three of 2017 as everyone adapted to the latest affordability changes, however, this year buy to let application volumes have begun to slowly rise again.
Large Landlords Diversify their Portfolios
Previously London has always been a key target for landlords buying, selling and converting properties; due to consistent rental demand and continuously rising house prices, landlords have benefitted from healthy returns on their investments. Following the EU Referendum, the London property market was hit hard and growth has since slowed.
Landlords who want to continue to grow their portfolios have instead begun to invest in Northern cities where properties are cheaper and rental yields are out-performing other areas of the country. For example, Manchester, Liverpool and Newcastle, particularly around university campuses because students tend to make stable tenants.
Smaller Landlords Scale Down
Some believe increased pressure on landlords may force some to leave the market, freeing up more properties in-turn for first-time buyers and home movers. Is this a necessary step or are there still healthy returns to be made from renting properties?
Buy to let was previously a relatively straightforward way for small investors to build-up assets which benefitted from capital growth and a significant monthly income. The market has now changed considerably and for some landlords is no longer worth the hassle.
In recent weeks, the National Landlord Association (NLA) has revealed that 20% of landlords intend to reduce the size of their portfolios this year. Of those investors surveyed, 86% owned one to four properties, clearly demonstrating the direct impact the recent changes have had on this sector of landlords.
25% of landlords who are looking to weather the storm said that they would need to increase rents to keep their investments viable.
Make Fixing Your Investments a Focus
Regardless of whether you choose to grow or reduce your property portfolio in 2018, ensuring you have fixed your buy to let mortgages should be a key priority. Last year, the Bank of England Base Rate rose to 0.5% for the first time since 2009 and there have already been rumours this year that it will soon rise again. This means for those on a variable mortgage rate that their mortgage payments will increase, further reducing the profit margin on their investments.
Here to Help
Although lenders have tightened their belts and now require a lot more information when processing applications, there are still some fantastic products available for landlords. To discuss the best buy to let mortgage to suit your needs, contact our team of whole of market Mortgage Brokers for a free no-obligation quote on 01325 605006 or arrange a call back.