Navigating the post-election landscape for buy-to-let | Steve Cox predicts a positive H2 2024

Originally published by Mortgage Solutions

I think it’s fair to say that, even in these early days post-general election, the UK buy-to-let mortgage market is poised for a number of potential changes in interest rates, driven by ongoing movements in swaps and anticipated adjustments to the Bank Base Rate (BBR) from August or September onwards.

As advisers active in this space, you’ll have already begun to see the evidence of this, with buy-to-let lenders such as ourselves already adjusting rates in response to these market dynamics, as we and our peer group, aim to offer competitive options tailored to landlords’ varying financial needs and investment strategies. 

This proactive approach reflects broader trends in the market, where lenders are preparing for potential rate adjustments amidst evolving economic conditions. For example, focusing on providing diverse product options to accommodate landlords seeking both affordability and stability in their mortgage arrangements. 

High fee mortgages still have their place 

For landlords prioritising affordability without sacrificing stability, we continue to see a large number of lower rate/higher fee products that provide competitive fixed rates.  

My belief at the start of the year, when it looked like rates would move downwards far more quickly than has happened, was these sorts of products would begin to dwindle in number. However, as the rate environment has remained at higher levels, the need for such options has also been maintained.  

Even with rates potentially moving further south, these products are still likely to be prevalent throughout the year, as they offer a lower monthly mortgage payment, even if the fee is high and needs to be added to the loan. The point here being that the lower rate allows the landlord to meet the affordability criteria in order to get the finance they need. 

Alternatively, landlords requiring higher loan amounts may opt for slightly higher rate products with fixed fees, rather than percentage charges, as it keeps those fees lower. These options also cater to those perhaps looking to manage larger-scale investments while also benefiting from the security of fixed rate financing.  

The important point here is that we have a wide array of product options available, not just of course in terms of fixed-rates, but also trackers, which may be attractive to those who anticipate a steady stream of rate cuts, and want the flexibility to be able to ‘jump ship’ at a point in the future that suits.  

A healthy buy-to-let market 

Looking forward, I think we might all anticipate continued adjustments in buy-to-let mortgage rates in response to ongoing market shifts. As mentioned, we are indeed already seeing this, with barely a day going by when lenders aren’t moving pricing in reaction to swap rates changing, but also of course in order to stay competitive.  

The mood music around the market suggests that the second half of the year – now with added political stability – is likely to bring in a significant amount of mortgage business. Some commentators have been suggesting two-thirds of all 2024 mortgage business could come in H2; certainly for those borrowers who might have been sitting on their hands and waiting to see what the political landscape was going to look like, they may now feel the time is right to act.  

Now, we have ‘stability’, and indeed we are hearing positive noises from the new government about housebuilding in particular, this may be seen by many landlords as the point they can start seriously looking at new purchases and how they finance those. 

We have not really heard a lot about supply-side measures for the private rental sector (PRS) from the new government, with the focus so far mainly being on tenant protection. 

This appears – at least initially – to be a pragmatic administration, and one hopes this means it will look at the need for greater numbers of tenancies, and how a boost to PRS supply would undoubtedly make a significant difference.  

Overall, while I am cautious about the future I am also optimistic. Certainly, this post-general election period represents a pivotal juncture for landlords navigating the buy-to-let mortgage landscape.  

With anticipated rate adjustments and dynamic market conditions influencing lender strategies, we and others, are aiming to provide tailored solutions that cater to the diverse needs of landlords nationwide.  

Whether through competitive rate products and/or flexible fees, advisers should be able to access a range of options that will empower landlords with the finance they need to grow portfolios and help provide the extra supply so desperately needed in the UK’s PRS.