Staying relevant in buy-to-let

2021 saw massive sector growth and change in the buy-to-let world. Increases in demand for housing and resulting higher house prices caused a shift in the market.

In turn, experienced investors expanded their portfolios, and there was a trend towards professionalisation in the sector.

Lenders responded and amended their product offerings – an example being specialist mortgages (like Housing of Multiple Occupancy – HMOs) becoming more popular.

Since then, we’ve been hit with the cost of living crisis, which could mean that owning a home may never be within the reach of some people. And, as inflation erodes the value of savings, and with increasing mortgage rates, accessing the housing market is certainly becoming more challenging.

The effect of this is that demand for good quality buy-to-let properties is on the increase, whether prospective tenants are saving to buy or looking at renting longer-term.

The number of people searching for a rental property was 76% higher at the start of this year than at the same time between 2018 and 2021. Investor activity is also driving up demand, as property investors look to residential properties as a potential safer investment bet.

Supporting the market

For lenders and brokers, with this as a backdrop, there needs to be a clear focus on evolutionas the market continues to shift – given how much change we’ve seen in the last year. For lenders, this includes keeping up with the demand for different product types, but not only meeting that demand, also developing the range as and when the market requires it.

For us, this has meant taking recent steps such as editing our buy-to-let criteria to ensure more borrowers qualify for a product, filling a gap in our lending policy; and extending our holiday lets and HMOpropositions to personal applicants – opening them up to more borrowers who needed them. We’re also planning further changes to make it easier for landlords to borrow from us whilst working within our risk appetite.

In the broker world, knowledge is power – this could mean finding out what the current and likely future challenges are for your buy-to-let clients (such as changes to EPC ratings or HMO rules) and adapting your offering to suit. By arming yourself with this type of information, you can earn a reputation as a buy-to-let specialist. Word will spread and your clients may recommend other landlords to you.

Brokers can also help themselves by having open and honest conversations with lenders about what they can or should do to help more landlords in this high-demand environment.

Another element to keep abreast of is the specialist buy-to-let world. Demand for staycations will likely be high again this year due to the cost of living crisis, as people choose the cheaper option of staying in the UK. The pandemic has also provided a flavour of the benefits of staying closer to home for a holiday rather than venturing overseas.

For the HMO market, whilst it may have recently become more challenging for landlords to obtain a HMO licence, the demand is certainly still there – especially as tenants potentially find themselves unable to afford to rent a property alone – and it’s up to us to service it.

Staying ahead

There are certainly a lot of moving parts in the current buy-to-let world. But one thing is clear – the market is moving, and changing fast, and lenders and brokers need to keep ahead of the curve.

But not only this – with no sign that the demand for rental properties will reduce in the near future, the market needs our support now, more than ever before, and as an industry, we must provide it.

Mike Davies is head of business development at YBS Commercial Mortgages

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