Mortgage experts give gloomy forecasts on buy to let

Mortgage experts give gloomy forecasts on buy to let


Todays other news


Mortgage experts appearing before a committee of MPs have given an especially gloomy forecast for the buy to let sector in the short term.

The experts told the Treasury Select Committee that landlords will face a stark choice between increasing rents further to try to break even or selling up because they cannot cover mortgage costs following the latest Bank of England base rate rise. 

Ray Boulger, the highly-respected senior technical director at broker John Charcol, said: “What we’re seeing now is criteria changes and we’re finding situations where clients are not able to proceed with the amount they originally planned to borrow because of criteria changes. It’s not all about rate, it’s rate and criteria, particularly stress test rates, they’ve been changed as a result of rates going up.”

He continued: “When you factor in the other impact of energy price increases and cost of living increases that can have a significant impact on what people can borrow. If you need a mortgage and you need a loan-to-value [mortgage] anything above 50 or 60 peer cent, with the current stress rates it’s going to be very difficult.

“And the knock-on effect of that, combined with some existing landlords selling because of the more onerous tax regime and other regulatory requirements and higher mortgage rates I think is going to have a quite serious impact on the availability of rental property over the course of the next year or two.”

Charles Roe, director of mortgages at UK Finance – the trade body for mortgage lenders – told the committee how the disastrous mini-Budget in September had led to mortgage lenders withdrawing products to re-price them upwards.

“Products were available. But lenders were also dealing with a large number of phone calls and requests that came in from borrowers who were concerned about their finances, would they be able to re-mortgage.

“But throughout that period, lenders were offering follow-on products to those borrowers that came to the end of a fixed-rate product.”

“We’re seeing the markets return to much more stability over the course of the last two to three weeks. As a result of that, swap rates [key to determining mortgage interest rates] have come down and in turn lenders are reducing their mortgage rates.

“When the yield on long-term gilts, so the yield on five-year gilts, goes up, the swap curve goes up, and the cost of hedging a five-year fixed-rate mortgage goes up.”

Chris Rhodes, chief finance officer at Nationwide Building Society, commented to MPs: “It’s marginally profitable for new buy-to-let investors if not loss making to take on board a new property, so I think there are potentially implications there in the medium term for the sustainability of the buy to let market.”

Share this article ...

Join the conversation: Login and have your say

5 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Recommended for you
Related Articles
Spending on rent and mortgages increased 4.5% in the year...
Mortgages key to recent housing market boost, say multiple agents...
The Guild of Property Professionals has entered into a partnership...
Nationwide is giving renters who want to be first-time buyers...
Reeves to slash Right To Buy discount on Wednesday...
It’s been revealed by Propertymark that HM Revenue & Customs...
A regional agent says the fear of further taxes on...
Recommended for you
Latest Features
Acorn is campaigning to beef up the Renters Rights Bill...
It's headed up two agents with three decades of knowledge...
A prominent lettings agent claims landlords are relieved that Capital...
Sponsored Content
In an industry where compliance and client money handling are...
PropTech provider Reapit will announce the latest enhancement to its...
B-hive Block Management Partners Celebrates Major Milestone With Over 100...

Send to a friend

In order to send this article to a friend you must first login. Click on the button below to login or sign up.

No one likes pop-ups ...
But while you're here