The private rented sector (PRS) continues to play an essential role in the UK housing market. However, mounting pressures are constantly reshaping the buy-to-let landscape, making it increasingly intricate and demanding for landlords. That said, this sector still presents opportunities, such as strong yields for certain property types and sustained profitability for well-balanced portfolios.
Professional landlords, in particular, have become the driving force behind current market activity, relying more heavily on mortgage intermediaries to navigate complexities and secure suitable lenders and products to meet evolving demands.
One of the primary drivers of this shift is the heightened cost of borrowing, combined with stricter affordability criteria. These factors are prompting landlords of all sizes to reassess their financial strategies and the viability of their portfolios. For many, this means making tough decisions about whether to retain or sell properties.
Despite these challenges, landlord sentiment remains relatively optimistic as many modify thier focus, offering a promising outlook for 2025 which is not always reflected in the mainstream media.
Shifting property focus and refinancing strategies
Professional landlords are increasingly turning their attention to higher-yielding property types, such as semi-commercial and commercial properties. Recent data from Shawbrook shows that applications for semi-commercial property purchases have risen by 31% year-on-year, and commercial property purchases increased by 28%.
Refinancing trends illustrate a cautious approach among landlords. The data shows that applications for refinancing without additional capital raising have risen across all property types, while those involving capital raising have declined. This suggests that landlords are prioritising debt management in today’s higher interest rate environment.
By securing fixed-rate mortgages through product transfers, landlords are focusing on optimising their existing portfolios rather than expanding or selling off assets. This prudent strategy highlights the importance of stability and long-term planning in uncertain times.
Opportunities for Mortgage Intermediaries
For intermediaries, these trends present significant opportunities to connect and engage with landlords and developers to showcase their expertise and value, particularly to those who may have experienced a series of financial challenges over the past 12 to 18 months.
A comprehensive understanding of specialist and bespoke lending options, along with their varied product offerings, is crucial for navigating these challenges in an increasingly complex lending world and in delivering tailored solutions to meet changing client needs.
For instance, landlords with impaired credit profiles can still secure financing if advisers know where to explore. Cultivating strong relationships with lenders and packagers allows intermediaries to provide greater levels of expert assistance, even for the most intricate cases.
Looking beyond the Headline Rate
Success in the current BTL market requires looking beyond headline rates. Intermediaries must consider all aspects of a product, including fees, affordability, valuation types, AVMs, and dual-solicitor options. Factors which can significantly impact borrowers, depending on their unique circumstances.
By collaborating with specialists like Envelop, intermediaries can enhance their expertise and provide comprehensive support throughout the financing and refinancing journey. With a growing number of specialist opportunities anticipated in 2025, proactive and knowledgeable intermediaries with strong relationships will be instrumental in shaping the future of the UK housing market while helping landlords sustain, and even surpass, historic profitability levels.
Donna Francis, Managing Director at Envelop
