PRS Fundamentals Provide Avenue for Portfolio Expansion
By Steve Cox, Chief Commercial Officer, Fleet Mortgages
We are now well into the new year and as advisers you are probably starting to get a feel for what 2023 might bring, and certainly what market stakeholders might be planning to deliver over the course of the next 11 or so months.
Not forgetting of course what your landlord clients are feeling about the housing market, and how they might want to approach the year ahead, in terms of both remortgaging (and potentially) further purchases.
Certainly, from a buy-to-let point of view, I think it’s fair to say that we, as lenders, are feeling our way into the year. At Fleet, we had an excellent 2022 in terms of lending volume and completions and it’s certainly our aim to continue in this vein, albeit without some of the peaks and troughs we all encountered; many of which were a result of factors beyond any of our control.
The anticipation is that we will have to ‘go some’ as a sector to match the £55 billon of gross lending completed last year, with trade body forecasts tending to come in around the late £40 billion mark, with remortgaging taking the lion’s share.
This forecasting down has led to a higher degree of negativity around the buy-to-let sector and PRS than it justifiably deserves, however – as many within our sector – have pointed out, such a ‘drop’ would only take us back to a ‘normal’ pre-pandemic buy-to-let market, and ‘normality’ is nothing to be sniffed at.
What makes this negativity even more off-kilter however is that even a cursory review of the fundamentals of the PRS will uncover why – if landlords can get their numbers right – it’s going to remain a popular, long-term investment option.
For a start, according to recent research by estate agent, Hamptons, the number of households who are now privately renting has grown by 1.12 million over the past decade.
This growing demand and activity within the private rental sector should be set against a backdrop where we have seen supply – or should I say available supply – fall back, particularly as ‘amateur landlords’ have found it increasingly difficult to deal with the increased costs of running a rental property.
However, for landlords that can marry up those costs with their incoming rental income, and can source well-priced mortgage finance that allows them to ensure ongoing profitability, there is clearly a deep well of tenant demand to draw upon – one that should ensure (if my maths is correct) that they benefit from their continued involvement.
And, of course, over time we have seen property values increase to ensure it’s not just about the ability to secure regular rental income but to benefit from increased capital values which could be accessed in order to fund future additions to the portfolio.
Certainly, as we have begun 2023, it is likely to be those landlords who have been in the PRS for some time and are looking at remortgaging existing properties – both for capital raising and on a like-for-like basis – who make up the bulk of clients and clearly advisers will want to ensure they are looked after, both from a price, product option and service point of view.
We have recently repriced all our fixed-rate mortgages and will continue to keep a watchful eye on the money markets and competitor pricing, to ensure we are offering advisers and their landlord clients the very best rates.
On top of this, we have a selection of Green products, priced below corresponding products, specifically for those landlords who are seeking to finance properties at EPC level C or above, and we have a range of trackers, which have been increasingly popular as landlords seek shorter-term alternatives, which may actually turn into longer-term options, depending on what happens to fixed-rates.
Overall, the point here is to all work to ensure we, as lenders, can support your buy-to-let advice proposition, and in turn, you are able to deliver exactly what your landlord borrower clients want and need. We will be here for you throughout 2023 and beyond to achieve that together so please make as much use of us as you possibly can.