Who wants to be a landlord?

One in ten UK adults are interested in becoming landlords and taking out a buy-to-let mortgage in 2018/19, according to a recent survey.

A change in income was the main reason people were considering taking their first foray into the world of buy-to-let investment research found. Nearly a third of those considering becoming landlords said they were “encouraged” by current opportunities in the buy-to-let market. Meanwhile over 25% admitted they were going down this route because they had received an inheritance or had become “accidental landlords”.

The survey also discovered over half of potential landlords had considered buying a house and 46% had been looking at buying new builds. Meanwhile, 41% were considering getting into buy-to-let by letting out a flat with 43% considering going down the new build route.

With almost one in ten UK adults showing an interest in taking out a buy-to-let mortgage in 2019, it meant that across the UK over 4.8 million people potentially could become landlords next year.

Fixed rate deals the order of the day

Two thirds of (66.8%) re-mortgaging landlords are opting for fixed rate mortgages, research has revealed. The small and multiple landlords are both typically looking for 2 or 3-year fixed rate deals and in some cases far longer periods.

Over 70% of mortgage brokers said first-time buyer and re-mortgage clients are applying for shorter fixed deals while 30% said they are looking for longer-term fixed rates.

The ongoing mortgage rate war among leading lenders has seen the launch of a range of low rates, especially in the fixed term market. Landlords who have suffered and are suffering all the new tax legislations see fixing a rate as an important part of their future planning. When fixing a deal expenses can be controlled and budgeted for over the term which is proving attractive to the majority of landlords.

The best deals do not tell the whole story as rates vary depending on how much equity landlords have or how big a deposit they can invest. The trend in the past two years has been to fix a medium-term deal (2-3 years) as there are potential longer-term savings to be made if rates were to reduce.

This does seem sound advice as we are in a very volatile market at this present time, with the Brexit talks have a huge baring on the long-term future.

Stable future for buy-to-lets

Forecasts based on data compiled by the Centre for Economics and Business Research have revealed the market will stabilise over the next year and experience growth until 2023.

According to the UK buy-to-let report, which is based on intensive research indicates there has been a marked change in market activity following the intervention by the Government, which introduced changes to mortgage interest tax relief and stamp duty. It came as the Prudential Regulation Authority brought in tougher underwriting standards.

As a result, mortgage approvals dropped in 2016 by 8% and then suffered an even greater fall of 13% in 2017 as the sector adjusted to the new regulations. Reports suggested this alteration was set to continue until 2021 – although it would be less severe than in recent years. Figures now show a steady growth again, especially in the private sector.

Rental income set to increase

Rents are set to surge by 15% over the next five years, as a shortage of properties pushes up prices, the Royal Institution of Chartered Surveyors (RICS) has predicted.

The reduction of new property coming to the market last month was the most striking aspect of the market, with 22% more surveyors noting a fall rather than a rise in new landlord instructions. It is the eighth consecutive month of declining supply.

The shortfall will have a limited impact in the short term, raising rents by around 2% nationally, but by 2023 there will be a significant increase in costs for tenants, according to the findings.