How are private landlords making a difference in the cost-of-living crisis?

Property investors are doing more than simply making money, suggests broker

How are private landlords making a difference in the cost-of-living crisis?

Increasing numbers of private landlords are providing properties to housing associations to bridge a gap in housing stock, according to landlord turned broker Paul Baker.

Baker (pictured), who has been a landlord for over 10 years, suggests that while buy-to-let borrowers clearly invest for financial reasons, it needs to be remembered that they provide a valuable service, supporting those who face affordability issues.

“The government and local councils only have limited housing stock and I’m seeing more private landlords supplying housing to local housing associations to make up the shortfall,” Baker told Mortgage Introducer.  “People often forget that private landlords, although being in it to make money, also provide housing for those people struggling to buy.”

Those landlords, Baker suggests, need support.

“The BTL market would definitely benefit from lower rates which would in turn make the rental stress tests more manageable,” he noted. “Buy-to-let stress rates halted the investment market for well over six months, probably nearer 12 months. I’m only just starting to see the BTL market get back to any kind of normality.”

Baker is an associate partner of brokerage firm The Mortgage Store, which was established in 2001 and aims to offer professional guidance and advice, and exclusive rates, which aren’t available from lenders. He is optimistic about the market going forward.

“I think that once the Bank of England feel able to start reducing the base rate, we will see overall interest rates reducing but not to the pandemic levels of 2021 & 2022,” Baker reasoned.

“People got used to historically low interest rates and budgeted accordingly and then when they came to remortgage, they had a huge shock when their monthly mortgage payments rose dramatically. This is just one of the current challenges we, as brokers, face on a daily basis when trying to match customer aspirations with a manageable monthly budget that doesn’t leave them exposed.”

He added: “I think we will be in a better place in 12 months’ time. Interest rates will hopefully have reduced a little, leaving less pressure on people’s household budgets.”

How is the cost-of-living crisis affecting prospective buyers?

The cost-of-living crisis is having a negative impact on people’s ability to save for a deposit, in Baker’s experience, and he believes the way Westminster’s decision makers respond could be beneficial.

“I think more government interaction with lenders would help them to offer better suited incentives and initiatives that would work across the board, rather than phasing in and out programmes that are just not fit for purpose in the first place, in some cases,” he remarked.

Some of lenders’ broker portals and application systems also need an overhaul, in Baker’s view, to help intermediaries in their day-to-day life. 

“I must admit that there are certain lenders that have poor application processes which just don’t seem to work properly,” he pointed out. “I know from speaking to other brokers that I am not alone in thinking this. Additionally, I think that a more open dialogue between brokers and underwriters would be beneficial for those cases that are not ‘vanilla’. 

“I think that sometimes lenders forget that we are dealing with the clients on a daily basis and have to manage their expectations, but also feel like we are able to give them a more detailed reason around application issues rather than just a ‘computer says no’ approach.”

Read more: What is the biggest frustration for brokers?

What makes a good mortgage broker?

Baker considers that a good broker appreciates that one size does not fit all.

“There are plenty of clients that I work with where you must think creatively and adapt to their situation, so that you can get them the right result,” he said. “I find this more with self-employed and limited company directors. It’s not always about the lowest interest rate, as getting the desired loan amount can be more important to some clients. 

“One thing I pride myself on is always being available to the client when they have questions to ask. I think being responsive really helps clients feel valued and the more information I can give them, the better their financial decision will be.”

Baker has been a broker since 2020, and previously ran his own limited company for 17 years. 

“I was looking for something different from my previous career, with more of a work life balance, as I had regularly been working 14-hour days,” he explained. “I’ve always been interested in property, especially buy-to-let investments. I had a friend that ran his own mortgage company, and he was looking to take someone on to help grow the business, so the timings were just right.

“After a couple of years working directly authorised, I found that a lack of support and marketing expertise within the business was really holding me back so decided to make the move to become an associate partner with The Mortgage Store. 

“This was definitely the right move for me as The Mortgage Store has offered me huge amounts of support when setting up the business. There are around 25 associate partners now, which is 10 more than when I joined in September 2023, so the proposition is really gathering momentum. Even though we are, in effect, self-employed, there is such a massive feel of community between us that it really helps on a day-to-day basis.”

He continued: “I really enjoy helping first-time buyers get on the property ladder and get a real buzz when they get the keys to their first property, knowing that I have helped them through the process. 

“I also get a lot out of working with self-employed clients - being self-employed most of my career I know that it can be difficult to get the required lending in some circumstances, but I think there are more and more lenders out there looking to help this slightly underserved sector. 

“I’ve seen affordability calculations tighten up as the interest rates rose. Clients that I had spoken to six months ago are now looking at an average of 10% reduction in the amount they can borrow on higher interest rates.”

Baker hopes to bring two more brokers into the business, so that they can help support his growing client base. 

“I’d really like to bring some new blood into the industry and may look at taking an apprentice that I could train and help gain their industry qualifications,” he said.

Despite a work life that’s clearly busy, Baker enjoys time away from his desk, on trips to the Peak District with his partner and their dog – and he  is a keen surfer too.

“When the conditions are right, there’s no better way to clear your head than to be immersed in the freezing ocean, with just the waves to do battle with,” he shared.