Your Business and Industry
BTL borrowing trends in 2022 - help landlords to combat rate hikes
Rates have been increasing, but at what level do landlords say they would have to consider selling a property?
Key borrowing trends are always worth following and this is especially apparent in the BTL market. And, in a competitive lending environment, it’s little wonder to see that 2 in 3 landlords intend to use a BTL mortgage to fund their next rental purchase.
This is according to Q2 2022 BVA BDRC Landlord Panel research data which also showed an increase in landlords expecting to use a BTL mortgage to purchase properties in Q2 (+4% vs. Q1 ‘22), with the proportion expecting to release equity also increasing (+11%, to 28%). In contrast, fewer landlords expected to purchase outright using previously invested funds this quarter (-7%, to 7%).
When looking at the overall picture, just over 4 in 10 properties in the average portfolio are owned outright, with the same proportion owned using BTL borrowing. The incidence of outright ownership decreased slightly vs. Q1 ‘22 (-6%), whilst ownership via BTL borrowing remained largely stable.
Fractional ownership and the use of commercial loans remained much less common, despite their incidence, both increasing in Q2 ’22 (+4% and +2% respectively). Fractional ownership and commercial loans continued to be most common among the very large portfolio landlords (20+ properties).
Rises in the Bank of England base rate were stated to be having an impact on pricing and borrowing demands but it was positive to see that landlords with 4-5 properties have been the most active in terms of both recent buying (27%) and selling (24%).
Staying on this topic, it was also fascinating to see how landlords might react if rates continue to rise. The research showed that - if interest rates rose by 2% - 18% of landlords would have to sell property vs. 10% at a rate increase of 1%. A rate increase of 4% would have a significant impact for many landlords, with 30% having to divest part or all of their portfolio.
The potential of such a rise is certainly something which lenders and advisers need to be fully aware of, as important is the awareness around how the specialist lending market can help more landlords to successfully divest and manage their portfolios. Speak to our dedicated BTL team to find out more.
FOR INTERMEDIARIES ONLY
