The Intermediary – September 2026 - Flipbook - Page 34
BUY-TO-LET
In focus
Reflecting on
resilience
R
eflecting on the last
few months, there
are clear and positive
signs that the buy-tolet (BTL) market, as a
surprise to some, has
remained resilient, in spite of the well
documented headwinds.
The worry about mortgage rates is
no longer the headline issue affecting
would-be BTL borrowers. While
affordability is still stretched in places,
landlords have adjusted, lenders have
adapted and refinancing is becoming
far easier in the last 12 or so months.
In fact, a distinct positive for
landlords is that competition between
lenders is back. Lenders have reacted
to an unexpectedly hearty appetite for
BTL borrowing.
Professional landlords are winning.
The days of owning one or two
rental properties with minimal
active involvement are becoming
increasingly challenging. The market
increasingly favours experienced
business-minded landlords, holding
their properties in limited company
and special purpose vehicle structures.
Demand continues to outstrip
supply in many areas, rents increase
and landlords’ yields improve. That
is why the sector remains aractive
despite the challenges.
HMOs and MUBs
There has been significant growth
in lending to house in multiple
occupation (HMO), multi-unit block
(MUB) and expat landlord borrowers,
which is down to the innovative
approach by lenders, creating more
relevant solutions for brokers and
their clients, who continue to look for
opportunities to diversify.
Indeed, we at the Family Building
Society listen to feedback from
brokers and their clients, and have
raised our HMO criteria to up to six
bedrooms for leing to students as
well as professionals. The demand for
expat limited company BTL borrowing
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The Intermediary | September 2026
is also to be noted. Typically,
professional expats really should plan
to be as tax efficient as possible while
working abroad, so that when they
return to the UK, they will not be
hit with unforeseen tax bills, levied
on rental income. This is a position
that accidental, amateur landlords
whose property is held personally will
continue to face.
Renters’ rights
Of course, there has been so much
speculation of the full impact of the
Renters’ Rights Act. Tenant protection
is moving up the agenda as the Act
intended, but there remain concerns
that additional obligations could make
some landlords think twice about
remaining in the market. Evidence
of this is obvious, as occasional or
accidental landlords sell up.
However, and taking a wider look
at the market, the initial concerns
over the impact of the Act appear to
be under control, as the professional
landlords – who have always
championed high standards for
their tenants – see the opportunities
for growth.
However, for many landlords,
affordability still remains the biggest
single blocker to growth. The demand
is there, but stress testing and interest
coverage ratio (ICR) calculations
continue to restrict borrowing. For
many landlords, the ability to raise
capital or grow portfolios is still driven
more by affordability than appetite.
There are other notable headwinds
facing would-be BTL borrowers.
Regulation continues to reshape
the sector. Tax is still the biggest
source of frustration – changes to
mortgage interest relief and ongoing
tax pressures have fundamentally
changed how many investors structure
their portfolios. Those who adapt will
thrive and those who don’t may choose
to leave.
The good news is that specialist
lending is becoming the norm rather
NATHAN WALLER
is BDM at Family
Building Society
than the exception. There are intricate
maers that brokers are becoming
skilled at finding answers for,
including limited company directors’
legal obligations, but also borrowers’
complex income, portfolio structures
and non-standard property stock.
Looking forward
Supply remains the big question for
the future. Beer regulation and
improved tenant protections are
positive developments, but if the
cumulative impact drives too many
landlords out of the market, the
risk is that reduced supply simply
pushes rents even higher. Lender
appetite is strong, rental demand
continues to support yields and
professional landlords are still finding
opportunities to grow.
While high-fee, low-rate mortgage
products are aractive now and are
perhaps lifesavers for landlords, they
could create challenges at the point
of remortgage, as the product fee is
oen added to the loan, increasing the
outstanding balance.
So, five years down the line, it may
make it more difficult for borrowers
to secure competitive remortgages,
particularly where the original fee was
relatively high.
When it comes to working out
the best product, a broker must
delve deeper into the customer’s
long-term plans and find answers to
these questions: What impact might
lower rate products with higher fees
have for borrowers concerned about
future mortgage affordability? Does
the lender offer PTs if the capital
growth doesn’t increase as expected?
Is cashflow for the new purchase the
main driver, or is it a balance between
income and growth, where a higher
rate and lower fee might be best? ●
