New research by leading agent Hamptons suggests that landlords are among the largest group of property owners who will sell up over the course of 2022. The news comes amidst turmoil in both the Government and the property market.
The agent claims that landlords with low yields are the most likely to exit the buy-to-let market, with those in London and the South East most exposed. Hamptons adds that net yields – the take home figure after all costs are deducted – are expected to remain broadly flat for the rest of the year, with landlords unable to capitalise on rising rents due to offsetting more expensive insurance premiums, running costs, labour, materials and mortgages rates.
The latter is of grave concern for landlords whose fixed rate mortgages are coming to an end, and for investors looking to take out further home loans to expand their portfolios. Securing property investment finance is entering one of its most challenging periods ever. As well as the number of buy-to-let products available dropping by 50% between September and October 2022 - and mortgage rates rising sharply - lenders are applying increasingly stringent affordability tests.
At the beginning of October, buy-to-let specialist The Mortgage Works revised its ‘stress test’ upwards from 5%, with landlords now having to demonstrate they could afford repayments if the mortgage rate attached to their product was raised to a minimum of 8.49%.
For many landlords, remortgaging will become an impossible exercise, especially as the cost-of-living crisis means rent rises need careful consideration. The Bank of England has already warned that tenants may struggle to meet their rent commitments against a backdrop of rampant inflation and rising living costs.
Amidst the mortgage market chaos and the sacking of Chancellor Kwasi Kwarteng, the Prime Minister (at the time) did clarify her stance on the Renters’ Reform Bill. Although there were rumours of a backtrack, sadly for landlords, there has been no change. The current Government is committed to the proposed reforms and Section 21 ‘no fault’ evictions will still be abolished before May 2023.
Selling with vacant possession will soon become a major headache in the private rental sector as a result of the above – bad news as more landlords are looking to sell up. Landlord Buyer is already providing a solution, however, as we purchase buy-to-lets with tenants in situ.
We can help landlords who need to quit the buy-to-let market – perhaps because of punishing mortgage rates or because running costs have eroded all profit. We will provide a cash offer for all buy-to-let properties, even those with short leases, in danger of being repossessed and those in a poor state of repair. Exchange can happen as quickly as seven working days – ideal for those who have left it late to secure new finance – although we can time exchange for when any fixed-rate mortgage deal ends.
Contact the Landlord Buyer team today. We can work out your new yield based on rising mortgage rates and discuss whether it’s beneficial to sell your buy-to-let or entire property portfolio.