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Property & Investment News

More Turbulence in the UK’s Buy-to-let Market

Purchasing property to rent out in the UK used to be a guaranteed investment, whether you were looking to build a thriving development portfolio or simply wanted to create a nice little nest egg. More recently, however, it seems that there’s a new blow to Britain’s buy-to-let market each week – and the start of June 2023 has been no exception.

The Telegraph is calling it the “remortgage crisis”, estimating that almost a quarter of a million UK landlords will suffer as a result of fixed-rate UK Buy-To-Let mortgages being withdrawn from the market.

Indeed, this week alone, lenders such as Aldermore, the Bank of Ireland UK, CHL Mortgages, Fleet Mortgages, Foundation Home Loans and The Mortgage Lender have pulled their entire range of fixed-rate buy-to-let products, with plenty of others following suit when it comes to scrapping their most preferable deals. This has left a measly 4600 viable offers to choose from – provided that you’re also willing to look past rising interest rates.

UK Buy-To-Let Market

Of course, as with everything in the buy-to-let world of late, figures continue to oscillate as certain lenders see the Bank of England’s latest inflation hike as a good reason to put their fixed-rate prices up, rather than fleeing from the game altogether. Examples include the Halifax, which has brought in a 0.3% increase, as well as Santander, which has introduced a 0.43% increase – not to be beaten by TSB, which upped its fixed-rate buy-to-let interest by an impressive 0.75% on the 7th of June, 2023. As of the 6th of June, this left the average rate on remaining fixed-rate deals at 5.69% for two-year plans and 5.17% for five-year stretches.

As the latest in a series of additional costs, this could come as a shock to those already on short-term fixed-rate deals that are due to expire in the coming months – a common boat to be in, especially given the number of pandemic purchases soon to be running on borrowed time.

It’s not quite time to give up hope just yet, however. Whilst most companies are withdrawing from the fixed-rate market in fear of being hit by even higher Bank of England interest rates looming on the horizon, others are seizing the opportunity to fill gaps in the market by introducing new fixed-rate packages to their product range. For example, Coventry Building Society launched a range of higher-rate deals on the 6th of June, despite previously withdrawing new business products last week. This includes two-, three- and five-year fixed-rate options and tracker products, where the two-year fixed-rate 75% LTV mortgage stands out at just 4.78% for residential product transfer.

Likewise, Vida has added a limited-edition fixed-rate mortgage to its buy-to-let range – although it does come with a hefty 75% loan to value, with an interest rate of 5.19%. This deal which could be pulled at any time without notice, is only available to first-time landlords or limited company borrowers and is only for mortgages of between £50,000 and £1,000,000 – but it’s a start. We should hopefully see a growing number of lenders joining the trend, meaning that, although rates will likely be a bit higher than they were, competition should drive excessive price hikes down and at least mean more stable prices at a time of relative economic uncertainty. Plus, with the right guidance, it’s still perfectly possible to secure a reasonable deal.

Of course, five-year deals are still cheaper than two-year deals, so, if you do need to switch to new rates, we recommend taking this into account. Indeed, it can make up to a 1% difference overall and hopefully, once the agreed five-year period has come to an end, the market will once again be a more favourable place.

It’s simply a matter of waiting things out and sticking with it for the long term. And remember to keep things in context. Although there are fewer tax benefits of investing in buy-to-let at the moment, there is still opportunity for profit out there, especially in larger cities where people struggle to find affordable housing despite needing proximity for study or work. In fact, despite the government’s recent efforts to even out the market and make life easier for first-time buyers, people are still struggling to get on the property ladder, especially in light of the cost-of-living crisis. Rental properties are still, therefore, in great demand, with prices at a record high; the national average reached £1190 per month at the start of the year and, at £2500, it’s currently more than double that in London.

Demand for rentals is only set to increase, too. In 2025, the government will implement its new EPC regulations, meaning that any property scoring less than C will be considered ineligible for tenants. Rather than seeing this as a threat (especially given that existing contracts won’t be affected until 2028 and there are price caps for improvements in place), see this as an opportunity. Not only will your eligible properties become more covetable but, if you have the funds, it could also be a good opportunity to pick up a bargain if you know how to boost EPC and take advantage of the regulations and limits set out.

The proposed timeline for these sustainability changes should also coincide with a recovering economy, hopefully marked by lower BoE rates and recovering house prices. Indeed, despite the fact that house prices seem to have slumped at the moment, with banks like Lloyds and the Halifax predicting an 8% drop in 2023, they should recover within the next five years. And let’s not forget that the capital value of buy-to-let property increased hugely during the pandemic, so it’s all relative, really. Buy-to-let is simply a patient man’s game and you’ve got to learn to ride the waves.

If you’re still not convinced, however, there’s always another solution to weathering this short-term storm. If it’s peace of mind and straightforward stability you’re looking for, why not counteract the UK’s current turbulence by investing abroad, instead? It’s much easier than you think and there are plenty of ideal locations, like Dubai, to choose from.

Click on the images below to explore some of our Dubai development investment opportunities:


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