Bad news continues for buy-to-let landlords

There is an argument to say first time buyers are in their strongest position for some time, as the market seems to have somewhat evolved in their favour.

This week saw the announcement from Lloyds Banking Group that they are motivated to assist first time buyers by increasing their loan to income multiple up to 5.5 times (subject to some key factors) for the right clients up to 90% borrowing. This has also been the case with Skipton who will also go to the same loan to income ratio, and now have some products also carrying a £1,500 cashback. When you consider Nationwide (who have been strong in this sector with their Helping Hand proposition) are still pricing keenly, competition seems rife in a part of the market that has been crying out for assistance for some time.

The rumours of Capital Gain Tax reform in the pending Autumn budget may well be the straw that broke the camel’s back for some landlords, so as some potentially start to asset strip, this flood of property to market may see supply outweigh demand, creating the perfect storm for first time buyers who can now leverage more, at lower rates, with less competition. Motivated sellers may also be keen to ‘do a deal’ especially if payment shock is around the corner for many, so the first-time buyer market in my eyes, is a market that is prime for take-off.

Hamptons had stated that the percentage of buyers in the city between January and June reached 48% for first time buyers, the highest since records began for them back in 2010. When you consider this was a time when rates were higher, and lenders loan-to-income ratios were not as strong, the latest news from Halifax for intermediaries, supported by Skiptons new product range, Nationwides Helping Hand and Accords LTI boost, there is an argument this percentage will increase in the second half of the year.

First time buyers seem to have adjusted to the ‘new norm’ in terms of interest rates quicker than most, and for those in rented accommodation, who have seen rents soar due to higher interest charges for landlords, there can be no better time for them to try to get on the ladder with so many more lenders supporting them.

Perhaps the biggest opportunity to consider is that the current stamp duty relief for first time buyers ends on April 1 2025. The so called First Time Buyer stamp duty exception - meaning no stamp duty is paid up to £425,000 - that was introduced back in September 2022, is soon scheduled to end. So this period between now and April 1, should be a huge one.

Whilst swap rates have stabilised over the last few days, lenders are still pricing downwards, but with energy bills scheduled to rise again in October, inflation potentially edging up a little, despite swap markets suggesting we could still be in line for two more cuts in the base rate over a twelve month period, there is very much a feel of striking now whilst the iron is hot. 

From a brokers perspective, the mortgage market started the year with a bang, but a cooling seemed to take effect from February onwards. The August cut of the base rate ignited a spark and built consumer confidence, and whilst Keir Starmer may have suggested a bumpy road is ahead, I feel that the first time buyer market will be as strong as ever. It is first time buyers more than anyone, that require the advice and recommendation offered from my broking peers. As the broker share of mortgage business sits near on 90% of the market, it looks set to be a busy end to 2024 as lenders continue to innovate. I expect first time buyers to benefit most, but once again, the long suffering landlords who have been hit hard over the years, continue to be targeted. 

Let us not forget what private landlords provide to housing. Private landlords provide a very large percentage of social housing in the UK as well as providing options for those who cannot access social support, or who are living through a phase of transition. They are of huge benefit to a housing market that still struggles to offer solutions to all, and rather than creating an environment they have no choice but to exit, more help is required to assist landlords hit with payment shock, to offer assistance to them from defaulting, and protection to their tenants who will also suffer huge rent increases if a practical solution cannot be found. 

First time buyers are in a great position, and it is encouraging to see lenders come to their aid when it is needed most. Now, dare I say it, more assistance is required for buy-to-let owners. Assistance aside from 7% fees to make stress tests fit, or double digit interest rates on standard variable rates for landlords that cannot remortgage. The buy to let market is in a dire need of assistance, and it is time to take action before the sector sleepwalks into meltdown.