2023 to reveal changes to the PRS

While the short-term outlook is much better than it was post-‘Mini Budget’, it is still likely to mean borrowers paying more for their mortgages than they have been used to in the last few years.

That said, we can see positives. Swap rates have dropped in the last few weeks, lender competition is strong, and a new year brings updated product propositions.

We are yet to see a big return in terms of shorter fixes, but that will come, and with more trackers/discounts now on offer plus a growing pressure on longer-term fixed-rate pricing, this should give advisers and their landlords more options.

What will continue to be a concern however is landlords’ ability to marry up growing mortgage costs – and others – with rental yield, particularly in a PRS where supply is tight, demand is strong, but tenants are also having to deal with the increased cost of living, and everything that comes with that.

Many properties which cost more than can be recouped through rent, are not likely to stay long in the PRS.

For 2023, that has to be a priority for those making policy. The Landlord associations have been writing to Michael Gove to point out the issues at the heart of the PRS: that a PRS in which supply continues to fall is not going to be able to meet the needs of UK housing, and makes the situation for both landlords and tenants even worse.

In Scotland, the rent freeze – due to finish in March 2023 – will be followed up by an increase in its version of stamp duty, (LBTT), for buy-to-let and second home purchasers from 4% to 6%. The Mayor of London, Sadiq Khan is also calling for rental freezes.

However, we must ask whether taking that level of control away from landlords is the answer, especially if they are having to pay more for all costs, including mortgages. How does that affect the chances landlords will sell?  

It might well be that the long-term strategy is to downsize the PRS – which currently provides 20% of all UK households with their housing – in order to open more properties up to purchase by owner-occupiers. However, there must be an understanding that in order for properties to be purchased by more of the population, it requires a number of other things to be in place, not least good access to affordable, high-LTV mortgages which tend to be required more by first-time buyers.

Where does the housing come from, if not from the PRS?

The answer is a tricky one for Government, because there is certainly not enough social housing available to fill any gap left by a falling PRS supply. Which means recognising what the PRS is currently doing both now and in the future.

Certainly, we will do all we can as a specialist buy-to-let lender to provide advisers and their landlord clients with what they need to keep invested in the PRS, but also keep investing to make this new year as strong as possible for all of our businesses.

*This article was originally published on BestAdvice

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