A key period for the BTL sector

As we transition into the Autumn period following a somewhat unexpected early September heatwave, this represents a key period for a buy-to-let (BTL) sector which has withstood its fair share of heat from a market, economic and interest rate perspective.

Now it’s certainly not uncommon for landlords who have been operating within this marketplace over an extended period to experience challenges of varying degrees.

However, these challenges have ramped up over the past few years with many newer, accidental or more speculative landlords not as well armed to deal with them compared to the more experienced and less exposed professional end of the landlord spectrum.

The result being a more portfolio landlord centric BTL landscape, a shift which is only likely to continue generating further momentum.

It’s also a landscape that is generating some cautious optimism and relatively robust activity levels which will be interesting to chart over the next few weeks and into Q4.

This is traditionally a busy time of year for advisers when it comes to supporting a range of landlord clients with their refinancing needs.

In line with some well-publicised rate cuts from an array of lenders across the sector and house prices coming under increasing pressure in many regions of the UK, we could also see some gradual uplift in the BTL purchase market.

Largely created by those portfolio landlords who are in a position to take advantage of properties which may be available below market value and prove attractive for medium to longer-term returns in the wake of growing tenant demand.

A factor evident in the latest data from Legal & General Ignite which reported that searches on behalf of portfolio landlords climbed by 22% from July to August as buy-to-let investors looked to expand their businesses.

Other landlords used financial support to enter the market, as searches for landlord/vendor gifted equity jumped by 18% in August. Additionally, searches for holiday let/Air B&B rose by 22% last month as landlords continued to capitalise on the pandemic-fuelled demand for staycations. 

These trends are placing an increased emphasis on BTL lenders to provide advisers with a wealth of options for landlords who may be seeking finance at this time, including those with more specialist circumstances such as HMO, expat or short-term lets.

After all, maintaining access to competitive solutions is critical in ensuring that landlords stay invested, and to be able to take advantage of the opportunities which are likely to emerge.

Understandably, in a market which can seem full of uncertainty, an element of flexibility must be maintained to help combat any further shifts in market conditions.

Although what’s more certain is that a reassuringly strong proportion of portfolio landlords are keeping faith in their existing and future property investments.

And, according to the Q2 2023 Landlord Panel research from BVA BDRC, with portfolio landlords more likely to intend to remortgage in the next 12 months compared to their consumer BTL landlord counterparts (42% vs. 18%) (slide 79), they will be increasingly reliant on the intermediary market to establish an even stronger foundation for their portfolios now and in the future.

Grant Hendry is director of sales at Foundation Home Loans