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Landlords Might Be Expanding Their Property Portfolios

The latest Landbay landlord survey reveals a surprising trend, contrary to expectations of a mass exodus from the rental market. It indicates that many landlords are determined to bolster their property portfolios through additional purchases.

While this finding has raised eyebrows among experts, brokers remain divided over whether the survey accurately represents the ground reality.

Michelle Lawson, director at Lawson Financial, emphasizes the distinction between having a “plan” and being “able” to execute it. She acknowledges that landlords may indeed have intentions to acquire more properties, especially with price adjustments in the market. However, she cautions against overlooking the crucial factor of whether they have the financial capacity to secure the necessary funding based on rental coverage.

Lawson points out that although lenders are offering reduced rates, they often offset this by imposing high arrangement fees that are typically added to the mortgage. While this arrangement can offer tax benefits, it also poses risks if property values decline and mortgages are maximized, potentially causing complications when the mortgage product expires. She stresses the importance for buy-to-let customers to consider the lender’s offerings at the end of the product term.

In contrast to the Landbay survey, Stephen Perkins, managing director at Yellow Brick Mortgages, believes it doesn’t accurately represent the entire landlord market. According to Perkins, most standard residential landlords are contemplating downsizing their portfolios due to rents failing to keep pace with rising mortgage costs as their deals approach maturity. He adds that remortgaging to other lenders is often difficult for landlords, as high stress tests are frequently failed due to non-adjusted rental income. This situation could lead to forced product transfers or the decision to sell the property.

Russell Maggs, mortgage and protection adviser at Maggs Financial Services, observes that buy-to-let landlords interested in capital appreciation will continue to invest. He sees potential in purchasing properties with lackluster Energy Performance Certificates (EPC) ratings and enhancing them to add value. However, Maggs notes that investing for cashflow reasons might experience a brief pause in the current climate. Nevertheless, he remains optimistic that investors with available funds will seek to diversify their portfolios and reduce overall risk in the long run.

On the other hand, Joe Stallard, director and adviser at House and Holiday Home Mortgages, believes that landlords vacating the market create opportunities for professional landlords to expand their portfolios. Stallard suggests that this expansion could be beneficial in light of recent regulatory tightening concerning EPC ratings. He points out that serious property investors are more likely to be quality landlords, providing superior housing options for those unable or unwilling to buy.

Lastly, Elliott Culley, director at Switch Mortgage Finance, reveals that established landlords view the current market as a chance to purchase properties at lower prices, benefiting from the exit of smaller landlords and waning interest from first-time buyers amid rate increases. With the flexibility to raise funds from existing portfolios, these landlords find it easier to make property acquisitions in the current market climate.

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