View more on these topics

Buy-to-Let Watch: Be brave and ride out the storm

As borrowers rush to beat a rise in Bank rate, and some portfolio landlords struggle with PRA 2, service will remain the defining factor


After a summer of incred­ible events across the globe, Brexit could seem a parochial inconvenience were the Government not weakened by in-fighting and the lack of a working majority.
So it was unsurprising to see ratings agency Moody’s downgrade government debt in September, causing a huge spike in swap rates, although they have since settled down again.

Then the stronger than anticipated GDP growth of 0.4 per cent exacerbated market expectation of a November rise in Bank rate, which then happened. Of course, several residential lenders had already withdrawn their most aggressively priced deals and, with a few exceptions, most BTL products were inching upwards too.

To my mind the bigger threat is to fixed rates. Those crazy residential five-year fixes at 1.65 per cent are over and anything below 2 per cent should be seen as having a limited shelf life. The BTL space can absorb the impact for a bit longer, as margins are higher, but I would be surprised to see five-year fixes from credible lenders below 4 per cent beyond the February MPC meeting, if not sooner.

However, the opportunity for remortgage business will be immense. Homeowners, including landlords, may run for cover in the months ahead before fixed rates move too far from relatively well-priced historic variable-rate loans.

Of course, we are still in the early period of PRA SS 13/16 Part 2, where portfolio landlords have been defined as those owning “four or more mortgaged properties” including the current transaction if a purchase — a definition that proved too complex for a handful of lenders as the 30 September deadline approached.

The issue for brokers is still service. We are entering an acclimatisation period and turnaround times will suffer, so we have a choice to make: do we send cases to specialist lenders or stick with mainstream providers with a limited understanding of the new processes?

We are working hard to react appropriately to client needs. There’s no point choosing a lender that is struggling to turn around cases if the client needs a quick deal. That said, many portfolio landlords still do not know about PRA 2. Brokers could find that this bedding-in period goes on for quite some time.

Longer term, some may quit BTL altogether, leaving a larger slice of the pie for remaining brokers, despite a predicted fall in overall BTL lending volumes.

Click on image to enlarge

David Whittaker is chief executive of Mortgages for Business


Financing properties owned in trusts

Part of a series looking at various niche markets within the buy-to-let sector where choice of lender is more restricted than for normal borrowers. One such area involves loans secured on residential properties owned through trusts. Properties can be held in trust for many reasons. For example, if a property is left to minors in […]


Interest rates predicted to rise in early 2020s

On 2 August 2018, the Bank Of England raised interest rates from 0.5 per cent to 0.75 per cent. The previous base rate rise was in November 2017, from 0.25 per cent to 0.5 per cent, which was the first raise for more than a decade. Mark Carney, governor of the Bank of England, said in August […]

Unfinished business?

Pension specialist Fiona Tait gives an update on three big announcements from the 2016 Budget – Pensions Advice Allowance (PAA), the Lifetime ISA (LISA) and the pension dashboard. £500 Pensions Advice Allowance What’s new Under current rules it is possible to deduct an adviser charge from a defined contribution pension fund to pay for financial […]


News and expert analysis straight to your inbox

Sign up