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Predicting the future of the BTL market
Forecasting the year ahead in the mortgage market is not an envious task. As we know from recent years, there are always likely to be some significant events and market movements which often mean there is no such thing as a ‘business as usual’ year on which to predicate such forecasts.
We have seen that in the buy-to-let market over the last 12 months or so, where a variety of unforeseen factors and circumstances have impacted on purchase levels in particular, but also the refinance fates of many ongoing landlord borrowers who have come to the end of their deals.
Higher interest rates, particularly when you compare what was available this year with the market a couple of years ago, have dealt a considerable blow and have raised the affordability barrier significantly for all landlord borrowers.
The scope of that impact can be seen in the latest lending figures for this year from UK Finance, and it is also no surprise that – when looking ahead – the trade body is being cautious about there being any considerable change over the next year or indeed into 2025.
Remortgaging activity predictions over the same period appear slightly more stable. This year there was £20bn of remortgage gross lending, and while UK Finance is predicting a further drop in 2024 to £19bn, it anticipates it back at this year’s level in 2025.
These predictions are completely understandable, particularly after a year which started well, but was undeniably hit by high inflation causing rates to rise, resulting in far higher product rates in the buy-to-let space, and many lenders forced to pull vast numbers of products because of the uncertainty.
We know that inflation doesn’t tend to move in a linear direction, either down or up – but it does appear we could be over the worst of the terrain we have had to deal with, particularly since Spring 2023.
Recent months have given us much more cause for optimism, and while there are clearly ongoing issues for landlord borrowers to address in terms of higher rates than a few years back, the impact on affordability, and making the numbers work in order to either add to portfolios or keep invested.
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There are still issues of course, particularly for those who might own only one or two buy-to-let properties who might find it harder to spread any extra mortgage costs across a smaller portfolio, but certainly those with significant portfolios appear to be wanting to add to them, and falling rates will clearly make it easier for them to do this.
Overall, there is continued interest in growing portfolios – if the rate environment is right, then we should get a more active product space and greater advice opportunities than some might currently believe possible.
*This article was originally published on Mortgage Solutions
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