Disclaimer
Market Financial Solutions are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice. The information in this content is correct at time of writing.
It’s been an eventful year for the property industry, but this is especially true for the BTL market. Landlords have been beset by several changes and challenges in 2024, but the outlook for them still remains surprisingly promising.
To round off the year, we reached out to our BTL team to get their thoughts on some of 2024’s biggest developments. In no particular order…
New kids on the block
In 2024, we saw many new lenders emerge in the BTL scene. This shouldn’t be surprising. Where challenges arise in certain sections of the market, new players often fancy their chances in solving them, and creating a name for themselves. We saw this in recent years when new bridging lenders came to the forefront as they tried to jump on an opportunity.
The question remains if these new BTL lenders are ready for what the market has in store for them. At the very least, they’ll keep existing lenders (including us!) on their toes. Nothing like healthy competition to keep everyone in check.
A surprising volume of lending
Despite all the pessimism out there, BTL investments are still in demand. Internally, we’ve been kept plenty busy by landlords and expanding property investors, but many may be surprised by how widespread this demand is.
In Q2, there were 51,459 new buy-to-let loans advanced in the UK, worth £8.9 billion according to UK Finance[1]. This was up 26% by number (27.7% by value) compared with the same quarter in 2023. Moreover, total mortgage lending rose for the second consecutive quarter in Q3, up 15% in total[2].
Hopefully, as we benefit from four potential base rate cuts in 2025[3], this momentum will continue.
Landlords have faced challenges
We can focus on the positives, but we can’t ignore the negatives. There is no getting away from it, many landlords have faced a difficult 12 months in 2024, especially in the 2nd half of the year[4].
While we won’t dwell on the challenges that are afflicting many landlords, we need to recognise that the market is up against tougher legislation, tax increases, higher costs, EPC requirements, and more. We can overcome all this with careful planning and aptitude, but some may have a long road ahead of them.
Deals coming to an end
On rising costs, many BTL investors would have been hit by a nasty shock this year. Some 144,000 landlords saw their five-year fixed deals come to an end in 2024[5]. Five years ago, the base rate sat at 0.75%. For most of 2024, it was 5% or higher[6].
Many landlords likely struggled to come to terms with their new reality when it came time to refinance. Rates are coming down once again, but now may not be the best time to lock in for a longer period. We may need a few years for things to quiet down, but that bodes well for us as a specialist lender. As always, we’ve been there for landlords seeking specialist, short-term solutions this year.
Unfair demonization
We were as surprised as anyone to hear that landlords are not working people[7]. Landlords faced an unfair battering this year, and this was on top of all the tough announcements made via the autumn budget[8].
The simple truth though is that our economy needs landlords. Buying a home is simply not a viable option for millions[9], and many are being forced to rent into their retirement[10]. Labour has high hopes to get building to even out the market, which is admirable, but it’s questionable whether this will work out.
Much faith is being put in the build-to-rent sector[11], and vast sums of capital has already been poured into the industry[12]. Billions have been set aside to get housebuilders building[13].
The potential issue here is that these new assets tend to cost more than their standard BTL equivalents, and their quality can be questionable[14]. We risk creating cramped new homes that only the rich can afford. Your old-fashioned private landlord may have been demonized in recent months, but their necessity may soon become apparent again as the bills pile up.
Emerging new opportunities?
All told, we don’t blame residential landlords for feeling that 2024 may not have been the best year for them. We don’t agree with the premise that there’s simply no hope at all however. In fact, we’re starting to see signs that landlords are exploring alternatives, rather than abandoning the market entirely.
According to Rightmove[15], demand for commercial properties of all types is now 11% higher than the same period last year, the biggest increase since 2021. Specifically, the industrial sector has seen the biggest increase within the commercial world, with investment demand rising by 34% in Q3 2024 when compared to the same time last year.
Our timing has been great here. This year, we launched both our Commercial BTL, and Bridge Fusion products which were designed from the ground up to accommodate expanding commercial investors.
So yes, 2024 was a tricky year for BTL. But it was nowhere near as bad as many believe it was. There is still plenty of life in the BTL market as we head into 2025. Thankfully, Market Financial Solutions is in a good position for the coming year.
We haven’t stopped lending, we have a large number of funding lines behind us, we’ve grown our workforce, we’ve expanded our products, and we’ve invested in tech. We are ready for 2025, so our brokers and borrowers can be to.
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