By: Moray Hulme, Director of Mortgage Sales
The buy-to-let market has faced a number of challenges in recent years. But despite long-term economic and regulatory pressures, buy-to-let portfolios have performed admirably throughout 2019.
Heading into the new year, the buy-to-let market is still integral to the overall UK mortgage market – though it has changed significantly, with important implications for intermediaries and advisers.
In this blog, we look at the topics and trends to help you get the most out of buy-to-let investments in 2020.
Increased complexity
Since 2016, landlords have been restructuring their businesses to remain efficient, resulting in more complex buy-to-let business with larger-scale portfolio landlords.
More than six out of 10 landlords expecting to purchase property in the next quarter expect to do so in a limited company structure – up from 38% less than two years ago – according to BVA BDRC’s Q3 2019 research. As a result, many mainstream lenders without a specialist underwriting capability are limiting their involvement to smaller scale, non-portfolio landlords.
Specialist lenders such as Paragon have adapted to this increased complexity by developing and extending their product ranges to meet more complex needs, so landlords have access to products that match the most intricate requirements.
Tenant-friendly regulation
From the ban on letting fees to the proposed abolition of ‘no-fault’ evictions, new tenant-friendly regulations mean landlords need to be more strategic than ever – with poorly organised investors at risk of being driven out of the market.
Increased tenant-friendly regulation might add to the complexity of owning buy-to-let property but is a good measure of just how important the Private Rented Sector (PRS) is to the UK housing market, which faces crisis due to population growth, limited investment in social housing, tighter mortgage affordability and other factors.
Millions of people rely on the PRS – and will continue to do so in 2020 – so it’s a good idea to stay up to date with the latest tenant-friendly regulation, which we expect to keep evolving in the coming year.
Focus on larger scale landlords
More research by Paragon shows larger scale landlords are three times (11%) more likely to consider buying than smaller scale landlords (4%), meaning despite a smaller overall buy-to-let market since the introduction of the Stamp Duty surcharge in April 2016 and subsequent tax changes, not all segments are shrinking.
Portfolio landlords are always looking for opportunities to maximise yield through property refurbishments and reconfigurations, or the purchase of HMO, and are the most likely segment to keep investing throughout the challenges that 2020 brings.
Specialist expertise
Given the more complex nature of the buy-to-let market heading into 2020, and the need for greater professionalism due to increased regulation, the role of the specialist lender is more important than ever to buy-to-let mortgage intermediaries.
Mainstream lenders are largely unable to cater for portfolio landlords and with 2020 set to herald an ever more specialist buy-to-let market, it’s important to know which lenders have the appetite and capability to support specialist requirements.