As the summer months transition into autumn, the UK property market has shown signs of positive change, especially for property investors. August and September brought welcome news, with mortgage rates falling consistently, a trend driven by growing post-election confidence and shifts in the Bank of England’s (BoE) monetary policy. Whether you’re a first-time buyer or a seasoned Buy-to-Let (BTL) landlord, the latest market developments offer reasons for optimism. Let’s dive into the key highlights.
Bank of England’s Base Rate Cut: A Game-Changer
The most notable development came in August when the Bank of England cut its base rate by 0.25%—its first reduction in four years—bringing it to 5%. The Monetary Policy Committee (MPC) held this rate steady during its September meeting, with Andrew Bailey, the Bank’s Governor, signalling that rates are “gradually on the path down.” However, Bailey emphasised that the BoE will need to see inflation staying low before considering further cuts.
With two more interest rate decisions expected before the year’s end, market experts anticipate another rate cut in November. Even rising geopolitical tensions in the Middle East aren’t expected to derail this trajectory, offering property investors the chance to benefit from lower borrowing costs in the coming months.
Mortgage Rates Continue to Fall
The fall in mortgage rates has been one of the most encouraging aspects of recent market activity. Swap rates, which underpin fixed-rate mortgage pricing, have hit 18-month lows, leading to a cascade of mortgage rate reductions. Average fixed-rate mortgage pricing is now at levels not seen in over six months. As of early October:
- The average two-year fixed mortgage is down to 4.93%, from 6.07% a year ago.
- The average five-year fixed mortgage has dropped to 4.58%, compared to 5.60% last year.
Lenders have responded enthusiastically to these developments, with major names like Barclays, HSBC, NatWest, Santander, and Virgin Money all announcing rate cuts. These reductions are not limited to residential mortgages either—BTL landlords have also seen significant savings as specialist lenders pass on interest rate reductions.
Boost for Buy-to-Let Investors
For BTL landlords, the summer has brought even more encouraging news. Specialist lenders like Fleet, Keystone, United Trust Bank, Foundation Home loans, and The Mortgage Lender have all lowered their rates, providing much-needed relief for investors.
Among the notable changes, Kent Reliance announced a rate cut effective from the 4th of October for properties held both in personal names and limited companies. As the BTL market diversifies, many landlords are moving into Houses in Multiple Occupation (HMOs), which offer greater rental income potential. Fleet, for example, has expanded its HMO product range, reducing fees and offering competitive rates. Steve Cox, Fleet’s Chief Commercial Officer, highlighted that HMOs are gaining popularity among landlords looking to maximize rental yields. Fleet’s product range now includes both short- and long-term options, catering to diverse investor strategies.
Lenders Evolving with the Market
As competition heats up, lenders are keen to adapt their offerings to support landlords. The Mortgage Works (TMW), a popular BTL lender, recently announced a policy change allowing inter-company loans as a deposit source. This flexibility is particularly beneficial for landlords operating through limited companies, as it provides more avenues for securing investment.
Damian Thompson, Director of Landlord at TMW, explained, “Accepting inter-company loans as a deposit is a prime example of how we listen and act on the feedback we get from the broker community. We understand the challenges limited company landlords face and know this policy will provide greater flexibility and opportunity for them.”
Landbay has also made waves by reintroducing automated valuations, a move that reduces costs for landlords by eliminating the need for physical property valuations. Similarly, Lendco has doubled its portfolio exposure limit to £20 million per borrower and increased its maximum loan size to £5 million. Lendco also launched a refurbishment bridge product and is now accepting HMO and multi-unit freehold applications from first-time landlords—a first for the lender since its 2018 launch.
Preparing for Future Challenges: EPC Targets and Taxation
While market conditions are improving, landlords face potential hurdles in the coming years, particularly regarding energy efficiency standards. The Labour government’s focus on improving the energy efficiency of UK rental properties means landlords could face a bill of £21.5 billion to bring properties up to an Energy Performance Certificate (EPC) rating of C by 2030. Estimates suggest that upgrading a property to meet these standards could cost an average of £8,000 per property—a significant investment, especially given the looming budget and potential tax tightening.
In response, several lenders, including Fleet, Paragon, and Foundation Home loans, have launched EPC-linked mortgage products, encouraging landlords to invest in energy-efficient upgrades while offering competitive financing options.
Final Thoughts: A Time of Opportunity
For UK property investors, the summer of 2024 has ushered in a wave of positive developments. With mortgage rates falling, more flexible lending criteria, and an increasing range of products tailored to the needs of BTL investors, there are plenty of opportunities on the horizon. Whether you’re looking to expand your portfolio, venture into HMOs, or simply benefit from lower borrowing costs, now may be the ideal time to make your next move.
Stay informed, act strategically, and keep an eye on upcoming interest rate decisions and regulatory changes. The property market is evolving, and savvy investors will find ample chances to thrive in this dynamic landscape.
This article is brought to you in association with Twelve92 Property Finance. Always remember that your home may be repossessed if you do not keep up repayments on your mortgage. Some Buy-to-Let/investment mortgages are not regulated by the FCA.
