Landlords are navigating a shifting market, with rising costs and new regulation prompting a surge in remortgage activity
The buy-to-let market is undergoing a structural shift, driven by the Renters' Rights Act and a wave of interest-only mortgages reaching maturity, with brokers seeing the consequences play out on their books.
Paul Hampton (pictured top), owner and mortgage consultant at Approved Mortgage Solutions, told Mortgage Introducer activity in his buy-to-let caseload has tilted decisively towards remortgages and away from new purchases, as landlords grapple with rising regulatory costs and products taken out during the market's peak years finally coming to an end.
"The buy-to-let market has slowed down a little bit, not massively, but we're busy more with remortgages on the buy-to-let side rather than purchases," Hampton said.
Accreditation and the quality divide
Hampton, who works closely with landlord groups including speaking at a Durham Landlords National event, said the clients he deals with tend to sit at the better end of the market, in part because of their engagement with accreditation schemes and continuing professional development.
That divide is relevant as the costs of operating as a landlord continue to mount. According to Hampton, a landlord property registration scheme was announced at the Durham event, carrying a fee of £65 per property per year – a figure he said represented a meaningful cost for smaller portfolio holders.
"If you've only got one or two properties, that's like a month's profit for most landlords," he said. "So again, that's another reason to increase rents, the additional costs."
The concern, Hampton added, is that compliant landlords bear those costs while rogue operators who fail to register their properties evade scrutiny. He noted that councils had been asked whether they would cross-reference registration data with Land Registry and council tax records to identify non-compliant landlords, and that local authorities had implied that was the plan.
What does the Renters' Rights Act mean for buy-to-let landlords?
The Renters' Rights Act came into effect on 1 May, introducing stricter rules around rent increases alongside the abolition of no-fault evictions. Under the Act, landlords can increase rent no more than once per year and must give tenants at least two months' written notice of any proposed increase. Tenants retain the right to challenge increases at tribunal if they believe the proposed rent exceeds open market value, and crucially, the tribunal cannot award a rent above the landlord's proposed figure, meaning any award is not backdated to the date of the original notice.
Hampton said the tribunal process creates a practical problem for landlords seeking to recover costs through higher rents. The legislation has added a layer of complexity to buy-to-let mortgage advice for brokers working with portfolio landlords, particularly those whose clients are considering rent increases for the first time under the new rules.
"If you were getting £800 and you want £1,000, you go to tribunal and the rent that's been achieved in that area is £900, then they'll grant you £900," he said. "So I think landlords are being realistic in the rents that they're going to increase by."
Hampton anticipates that a large proportion of landlords will reach their annual rent review point simultaneously, with most increases likely to fall around the same time next year.
"If they all apply a 5% increase, then as a tenant, your options are to find another property, which is going to be much harder, and you're moving out of one rent into another rent, or you buy a house," he said.
The 2001 cohort and maturing mortgages
Perhaps the most significant structural opportunity Hampton identified concerns a cohort of buy-to-let properties purchased in 2001 and 2002, when the market was at its peak and lenders routinely offered 90% loan-to-value mortgages on interest-only terms with 25-year maximum terms.
For those landlords, the maths is now catching up. A 25-year interest-only mortgage taken out in 2001 would reach maturity in 2026.
"Now they're coming to the stage where the mortgage is coming to an end, not the product, the mortgage," Hampton said. "So now you've got these lenders who are coming and saying, you owe us £75,000, can we have our money back?"
Hampton said the maturing of this 2001/02 vintage – combined with rising operational costs and regulatory change – represents a significant pipeline for brokers who specialise in buy-to-let mortgage advice for portfolio landlords and who understand the complexity involved. Those prepared to engage with landlords who have never previously reviewed their specialist buy-to-let remortgage options are well placed to capitalise.
"There's a massive opportunity for anybody who does buy-to-lets, who knows what they're doing, to source this kind of business," he said. "And there's loads of landlords who have done absolutely nothing because the interest rates have been so low. They've been paying 1.5%, so why would you? They've never overpaid the mortgage. But now the lender's come knocking on the door saying, can we have our money back? And they've got to act."
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