Month: June 2022

The buy-to-let market has made a strong bounceback from the pandemic, with demand for rental accommodation soaring in many parts of the country, in particular student hotspots such as Manchester.

But while investing in buy-to-let still offers attractive returns, landlords are still facing rising costs, especially when it comes to paying mortgages.

According to new figures from Property Master, monthly costs on a typical five-year fixed rate buy-to-let mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £346 to £359 since the start of 2022, or £13 a month.

Meanwhile, monthly costs on a typical two-year fixed rate mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £351 to £365, or £14 a month.

Angus Stewart, Chief Executive of Property Master, described the increase in the cost of buy-to-let mortgages as “relentless”, and warned the current “turbulence in the money markets” is making it harder for some lenders to raise the funds.

This, he said, means there is “a fear that as well as higher mortgage costs, landlords may also face reduced choice”.

“Whilst it is true that buy-to-let mortgage costs may look low from an historical point of view, the increases we are seeing now come at a very bad time,” Mr Stewart commented.

“Increased taxes and regulation have already chipped away in recent years on the returns landlords can hope to make.”

But while the prospect of higher mortgage repayments lies in store for rental landlords, it’s far from doom and gloom in the buy-to-let mortgage market.

Number of BTL mortgages being issued is rising
Despite increases in the cost of buy-to-let mortgages over the last few months, it’s clear that people investing in rental property continue to see the market as a strong investment option.

According to new data from Knight Frank, 275,600 buy-to-let mortgages were issued in the year to February 2022. This includes 159,100 remortgages and means the number now stands at a six-year high.

Figures also showed that the number of new mortgages taken out by buy-to-let landlords rose to 110,000 during this period, up from 75,8000 in the year to February 2020. These were taken out both by investors expanding their portfolio and those entering the buy-to-let market for the first time.

The attractiveness of the market to new and existing investors has been fuelled partly by increasing rental rents, which have outpaced house price increases in some parts of the country.

In fact, Knight Frank has estimated that rental values across the country could go up by more than 17 per cent over the next five years, and the rate of increase could be higher still in the main hotspots of activity.

Meanwhile, latest figures from Hamptons show that more than one in ten properties sold across Great Britain between January and March 2022 were purchased by buy-to-let investors.

Landlords bought 42,980 homes during the first quarter of the year, which equates to 13.9 per cent of properties purchased during this period.

Nevertheless, Hamptons pointed out that tax and regulatory changes have prompted more landlords to sell up in recent years, and that there are now around 300,000 fewer privately rented homes in Great Britain today than in 2017.

So while the picture in the buy-to-let market is clearly mixed, it’s apparent that savvy investors can still earn healthy returns on the right properties in the right areas, which could more than make up for rising mortgage costs.

For many of us, old age and retirement can feel a long way off, and with the world seemingly lurching from crisis to crisis, many of us are focused on simply getting through the next few days and weeks, rather than looking too far ahead.

However, that approach could simply store up problems for the future, which is why we’d urge anyone to start planning for their retirement as soon as possible.

According to a new study by Hargreaves Lansdown, one in five people said they would leave planning their retirement until they’re aged 60 or above.

The same survey showed that one in five people would only begin retirement planning at the age of between 30 and 39. Similarly, just one in seven people said they started planning for retirement when they were aged between 18 and 24.

So what does this mean for future retirees? Well, it’s a fact that the sooner you start putting money into your pension, the more time you have to build up a sizeable sum that should see you through your retirement.

Conversely, if you start too late, you’ve got a very short space of time in which to build up a retirement fund, which could hugely affect your ability to lead the lifestyle you want to enjoy after you finish working.

And if you start projecting your likely pension income in retirement, you may find that you don’t have very long in which to make up any shortfall.

Commenting on the figures, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, acknowledged that it can be “easy to put off planning until the last moment”.

However, she insisted that pensions were a “long-term game”, which means action needs to be taken sooner rather than later.

“It’s worth taking the time earlier in your career to think about what kind of retirement you would like and put a plan in place to help you achieve it,” Ms Morrisey commented.

A lack of financial knowledge and education about pensions and retirement could be one big reason why so many people are kicking in the can down the road.

In fact, according to a YouGov survey, commissioned by Drewberry, 41 per cent of people with a workplace pension don’t actually know what they’re paying in and what they’ll get from it when they retire.

More than half of those polled also said they’d like to know if they’re saving enough for retirement, and significantly, one in three believe their employer should pay for them to discuss retirement planning with a financial adviser to get a better understanding of their finances.

Whether a lack of financial education leads to people ignoring and putting off financial planning is a constant topic of debate in the financial services industry. But it’s clear that more needs to be done to engage with both employers and savers on this issue, so people are properly set up for later life, and the fear factor that surrounds pension planning is taken out of the picture.

Interestingly, 87 per cent of the people polled by YouGov said they pay into a workplace pension, while 56 per cent said the provision of a workplace pension is important to them when they’re looking for a new job.

That suggests that many people do want to lay down the groundwork to secure a happy and prosperous future, but don’t necessarily know how – and that’s where making financial advice available and accessible becomes so important.

In recent years, the housing market has been a beacon of light even in the face of the most severe economic headwinds. But new data from the Bank of England suggests that activity in the housing market is starting to slow down.

According to the latest figures, mortgage approvals for house purchases fell from 69,531 in March to 65,974 in April. Meanwhile, net mortgage borrowing dropped from £6.4 billion to £4.1 billion – a slump of more than a third.

So what’s behind these figures?

Well, inflation is now at its highest level in four decades, and rising costs recently prompted the Bank of England to raise interest rates to 1%. The Bank also expects inflation to pass the 10% mark and for the economy to slip into recession before the end of the year.

As Hina Bhudia, partner at Knight Frank Finance, said: “Activity among purchasers is ebbing as the cost of living squeeze shrinks the pool of buyers.”

Speaking to Sky News, Ms Bhudia noted many people are also looking to refinance existing mortgages in order to beat rising interest rates.

“Rates on certain products have doubled in the past 12 months and there is a real sense of urgency among many borrowers who sense they must act soon or reassess what they can afford,” she stated.

Jeremy Leaf, former residential chair of the Royal Institution of Chartered Surveyors, also believes the cost of living crisis is behind the recent slump in mortgage approvals, which he described as a “good lead indicator of housing market direction”.

“This latest reduction confirms what we have been seeing at the sharp end over the past few months – successive monthly increases in the cost of living as well as interest rates are compromising confidence to take on additional debt and having an inevitable knock-on effect on price growth,” he commented.

Mr Leaf went on to state that with available housing remaining in short supply, significant changes in prices are “unlikely”. However, he pointed out that as there is less competition, it is taking longer to exchange contracts in many cases.

House price growth slows down
During the same month in which mortgage approvals and borrowing fell, house price growth slowed down. According to Nationwide, house prices went up by 11.2% in May year-on-year, compared with 12.1% a month earlier.

So while property values are still rising, even in the face of huge inflationary pressures, momentum appears to be easing.

Nevertheless, the same data shows that house prices still went up for the tenth consecutive month during May, meaning the average property in the UK now costs £269,914.

Like Mr Leaf, Nationwide cited a shortage of housing stock as one factor behind the continued strength of the housing market, despite “growing headwinds from the squeeze on household budgets”, as well as rising interest rates.

Robert Gardner, chief economist at Nationwide, now predicts the housing market to continue to slow down over the next few months.

“Household finances are likely to remain under pressure, with inflation set to reach double digits in the coming quarters if global energy prices remain high,” he said.

If you have any questions about applying for a mortgage or remortgaging your property, please don’t hesitate to get in touch with us and we’ll be happy to help.