"Advisers will play a hugely significant role here and should certainly be taking the rate movements as their cue to review what their clients have coming up"
The summer/school holidays can seem like a period of stasis for the market in most ‘normal’ years but I suspect 2024 already feels a little different to that.
That is based off the fact we’ve just had a Bank Base Rate (BBR) cut which should increase demand, plus for example, the schools in Scotland are already back, September is just around the corner, and we might all anticipate that this will mean a further increase in activity because the holidays will be over everywhere.
Already, according to the latest Rightmove data, that cut to BBR has had an immediate impact with the portal recording a 19% year-on-year increase in the number of potential buyers contacting estate agents, which is also up 11% month-on-month.
We don’t know how many of those potential buyers were looking at buy-to-let properties – and of course the bulk will be owner-occupier – but I suspect a significant number of landlords will also have taken notice, will perhaps have seen product rates dropping, and as a result be looking at what they might do in the months ahead.
This will be especially the case for those landlord borrowers who have mortgages maturing over the next few months, particularly if they last remortgaged at the same time in 2022 – a nadir for the market post-‘Mini Budget’ – or, to be quite frank, whenever they last mortgaged because there is likely to be a significant monthly payment shift as they will be looking at products in a much different rate environment.
That said, we know many landlords active in the sector – and certainly the majority of the borrowers we deal with at Fleet – are of the portfolio/professional variety, which opens up a number of options that are not necessarily available to those who perhaps have not been invested for so long, or don’t have the portfolios to be able to access equity across multiple properties.
There is always a lot of talk about landlords leaving the sector, but as we see time and time again, these tend not to be portfolio landlords selling their entire stock, but those who are willing and able to cut their cloth accordingly. Perhaps divesting themselves of one or two properties that are not performing as they wish, in order to purchase those that might be able to do the job better for them.
That could mean purchasing higher-yielding properties such as HMOs or multi-unit blocks, or looking at short-term or holiday lets, or it could be accessing equity/finance from properties in order to be able to convert existing properties into those that can deliver a better yield.
When you have a larger number of properties within a portfolio you tend to have many more options at any given time, and it’s important advisers start such conversations early with their landlord clients in order to hear what they may have planned, and so they can provide potential financial solutions for what they might wish to do.
This becomes even more important as you reach maturity dates on certain mortgages, because you want to be able to offer market-leading rates while at the same time potentially completing a full portfolio overview which might provide the borrower with different options than they had first realised.
What we do currently know is that, while the rate landscape doesn’t look anywhere near as good as it did three/five/10 years ago, recent weeks have seen some notable price cutting, as lenders seek to make the most of BBR/swap rate drops, but also as we move into the final three months of the year when lenders are looking to secure business, not just to go on 2024’s books but also to ensure they can start 2025 with a decent pipeline.
Regardless of it being still summer, lenders are still quite obviously thinking about the short to medium-term future, especially if the rate cuts we have already seen are likely to bring back a growing number of interested landlord borrowers, who might otherwise have preferred to sit 2024 out.
My view is that there has been a lot of that in the last 12-18 months – some because of necessity but others because they are looking for the opportunity rather than feeling the need to force it. Now that rates appear to be heading downwards, heads are appearing above the parapet so to speak, and there does seem to be a growing, but cautious, optimism about what can be achieved in the months ahead.
As always, advisers will play a hugely significant role here and should certainly be taking the rate movements as their cue to review what their clients have coming up, but to also make contact with all those who might be impacted, or might wish to do something because of these pricing changes.
Sometimes clients don’t know what they don’t know so don’t leave them ignorant about the opportunities that could exist for both them, and you.
