Now is a Time for Calm, Patience and Professional Advice
It’s unlikely that you have missed the headlines of ‘mortgage market turmoil’ in the last week. At one point around 300 mortgage deals were pulled in a 24-hour period, amidst money market uncertainty, and there were more to follow.
So, what does this mean for the Buy to Let market? And, as a landlord, what does it mean for you?
It’s worth starting by giving some background to the dramatic movements of the last few days. The Bank of England is tasked with controlling inflation and rate rises throughout the year have been an attempt to limit the inflationary impact of rising energy and food prices.
The government’s announcement of measures to stimulate the economy on 23rd September were considered by the markets to put further upward pressure on inflation and caused a drop in value of the pound, which in itself can trigger inflation as imports become more expensive. In response to this, the Bank of England said that it would deliver a ‘significant policy response’, indicating further and, possibly larger, rises to the Base Rate.
This warning shot was taken on board by the money markets and the cost of swap rates shot up. Swap rates are the price at which lenders secure money that they use to fund their fixed rate mortgages and are based on the anticipated level of future interest rates. With such a dramatic increase in swap rates in such a short time, many lenders took the decision to temporarily withdraw their fixed rate mortgages to properly assess the situation.
It's worth noting that this scenario is taking place following a period where mortgage lenders have been dealing with increased lending volumes and many lenders had already been withdrawing some of their products in order to control business so that they could maintain their service levels, so this period of withdrawals is an acceleration of a trend that was already taking place.
So, what does this mean for you?
My guidance would be, just as mortgage lenders are pausing for breath to assess the situation, so should you. There is fixed rate availability at the moment, albeit from a smaller pool of lenders and so there are product options still out there. However, in some instances there could be an argument to park any enquiries for a new mortgage until a greater sense of normality and product options have returned.
The reality is that most landlords will still be in the middle of their fixed rate cycle, with time remaining until the rate comes to an end. More than 8 in 10 Buy to Let mortgages we have completed for clients since 2017 have been on a 5-year fixed rate, so chances are, you don’t need to do anything now.
In the coming weeks the markets will stabilise and will settle at a new level. This level may be somewhat higher than we had anticipated earlier in the year, but it may also be lower than people are fearing now. The long-term outlook hasn’t changed all that much, but it’s clear that the market will be entering a period of uncertainty for the short to medium term.
Now is a time for calm, patience and professional advice. The Buy to Let mortgage market continues to be a competitive environment, with lenders wanting to lend and this will not change. If you are concerned about the current situation and you have mortgages that are due for renewal, speak to a professional adviser, who will be best placed to navigate the market to find the best deal for you.
You can help put yourself in the strongest position to secure the best deal by ensuring that you are ‘document ready’ and have all of the supporting material a mortgage lender may request as part of your application. This includes tax documents, portfolio information, rental bank statements, proof of income and address, ID and a valid EPC.
If you have all of the supporting documents to hand, you will be able to move quickly when the time comes.
This blog was written on 28th September and information was accurate at the time of writing. In a fast-moving situation,
