Pandemic brought a renewed focus on homeownership
The buy-to-let market has undergone numerous changes in recent years due to government alterations as well as adjustments led by the financial state of the market.
“The buy-to-let market has been buffeted to say the least in recent years, with changes to tax relief and tighter criteria being implemented by mortgage lenders,” said David Hollingworth (pictured), associate director of communications at London & Country Mortgages.
Hollingworth believes that the pandemic brought a renewed focus on homeownership as people sought more space and considered whether working from home could broaden their scope to buy. For the most part, this meant a shift away from city centres and saw people focusing more on larger properties on the outskirts of cities.
This impacted both the residential and buy-to-let market as the desirability of many rental properties in city centres dropped because people were no longer required to go into the office five days a week. He explained that while people do still want to buy property, the ‘race for space’ has only seen prices rise further.
“However, buy-to-let has shown perhaps surprising resilience and has proven it can continue in very consistent fashion throughout, despite these various hurdles,” said Hollingworth.
Hollingworth believes this helps to underline to landlords some of the benefits of investment in rental property, both existing and also any potential new purchases.
“Many will have secured low fixed rates to help protect from the rate rises now feeding in, which suggests that many have not got plans to jettison their properties,” he said.
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Presenting a solution to a crisis
For those who secured a new mortgage during the height of the pandemic, once their terms conclude they are expected to be hit with the highest interest rates since 2015. The Bank of England has continued to increase the base rate, with it reaching 1% in May and expected to hit 2.5% by the end of the year. On top of this, inflation has reached its highest level in 40 years, with many anticipating this to get worse due to the cost-of-living and energy bills crises.
“It also means that the affordability challenges that have blighted first time buyers’ hopes of getting on the ladder for many years are only heightened,” added Hollingworth.
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“That is especially true as we have emerged from the impact of the pandemic, when the ability to save was enhanced.”
According to Hollingworth, with everyone facing substantial increases to the cost-of-living that ability to save could be curtailed. He believes that, as such, the buy-to-let market has an important and ongoing role to play - with property prices continuing to rise due to a lack of supply, many, whether they want to or not, are turning to the rental market for housing.
Hollingworth explained that at London & Country Mortgages, he has seen lenders review their approach so there is more variance on offer now depending on the individual circumstances.
“However, that is not to say that it will necessarily be plain sailing and the potential for the ante to be upped on the required Energy Performance Certificate (EPC) rating in coming years could heighten landlord concerns about how much they may need to invest to meet any new stipulation,” he concluded.
