"Given the challenges brokers and landlords have experienced over the last few years, increased renters rights adds legislation to a sector that has by no means been immune from the recent economic turmoil."
The Renters’ Rights Bill, which appeared in the King’s Speech announcing the new Labour government, will provide greater protection for tenants in England and Wales and make it illegal for landlords to discriminate against those on benefits or with children.
The new law finally puts into place the renters’ reform proposals made by the previous government and brings England and Wales into line with Scotland, where no-fault evictions have already been abolished.
While any enhancements and protections made to the experience of renters are of course, always welcome, it is important to note that the last few years have also been a particularly challenging time for buy-to-let landlords.
Adjusting to spiralling costs
Rapidly rising interest rates, the cost-of-living crisis and changes to tax relief have all had an impact on the rental yields of buy-to-let landlords, with some opting to offload parts of their portfolio in order to improve cash flow.
In other cases, some landlords have tried their best to navigate the higher cost environment. Overall, this has resulted in some negative commentary around the private rental sector as rents have continued to rise and stock levels have started to fall.
Despite these challenges, it is important to remember that the private rental market will always be an important component of the UK’s housing sector. There will always be a need for people to seek out rental accommodation, whether this is because they need a temporary place to stay for the mid-term or because their circumstances currently prevent them from progressing towards home ownership.
Either way, having the option to rent a home will always be in demand.
Real-life support in product design
In light of this, it is therefore crucial that the mortgage industry continues to offer a wide range of product solutions designed to support buy-to-let landlords. This is particularly relevant in the new economic climate where it is hoped that lower inflation, falling interest rates and greater stability will lead to increased demand in the property market.
Mansfield Building Society has always been a strong supporter of the buy-to-let sector and our recent approach has been to support affordability challenges that landlords may be currently facing.
In addition to the rising interest rate environment, regulatory requirements place emphasis on the rental yield of the property being over and above the typically expected monthly mortgage payments.
To support affordability assessments in the rising interest rate environment, we’ve tried to offer products that keep the initial rate as low as we can. Our range has also included long-term five-year fixed rate products, these offer repayment stability and the ability to stress rental income at the product pay rate.
In certain circumstances, we also offer the ability for borrowers to use earned income or other personal wealth to support rental income. Also known as top slicing, it can help landlords tackle rising interest rates where the rental income only needs to meet monthly payments at the product pay rate.
Being comfortable with complexity
Catering to the needs of landlords is crucial to a healthy economy and a stable housing market. However, I would argue that some lenders have been attracted to the sector because of its simplicity and more from the significantly reduced regulatory requirements.
As a building society, we try to be as even-handed as possible and dealing with complexity or regulation is just part-and-parcel of our expertise and integrity. For example, it’s why we offer regulated family buy-to-lt and why we’re comfortable to now expand our buy-to-let lending in Scotland, which already protects renters rights.
Given the challenges brokers and landlords have experienced over the last few years, increased renters rights adds legislation to a sector that has by no means been immune from the recent economic turmoil. Offering flexible and versatile borrowing solutions that can help these landlords, despite the perceived complexity, will be crucial.
