3 market factors keeping landlords in the sector

Amidst intensifying talk of a great landlord exodus and rising fears around available stock, it’s certainly an unsettling time to be in the buy-to-let market. There’s a huge amount to contend with; from rising mortgage costs to an ever busier regulatory environment. 

However, shifting economic headwinds and opportunity emerging from adversity mean that new factors keeping landlords from leaving the sector are increasingly visible. 

Interest rates are returning to earth

After five months of escalating interest rates, mortgage prices are showing signs of a cool down. In February, HSBC was the first to break the mythical 4% barrier – offering a 5-year fixed rate at 3.99%. 

Industry experts believe that this represents a vital step towards the re-introduction of a more competitive market. Whilst rates are still far from their 2020 and 2021 lows, they offer a more tolerable and manageable set of options for landlords. 

For portfolio owners who were heading towards the end of fixed-term deals later this year and considering selling-up as a result, this de-escalation of rates could give them pause for thought. 

Rental properties are needed more than ever

Despite decades of calls for more house building, the UK is still lagging far behind targets for new homes. 

That means demand for rental properties is higher than ever before. Looking at the data, recent years have shown consistently low voids and stable or rising rents being paid for properties across all regions. 

There remains huge demand for landlords offering good quality homes to rent. And, arguably, we have never needed these landlords more.

For those who stay put, tenants are keen to move in. And, thanks to the advent of sophisticated technology such as open banking and AI-powered ID software, landlords can gain more assurance than ever before that their tenants are who they say they are, and can afford the rent. 

In crisis, there is opportunity 

There is a huge amount of anecdotal evidence that landlords are selling up and getting out of the game (although hard numbers are tricky to come by). But, as with any crisis or challenge, therein lies an opportunity. Those who are in a position to weather short-term winds and focus on the long-term have a lot to be optimistic about. 

Looking ahead, landlords are looking at a potentially calmer market where lower mortgage rates are available and rental demand remains strong. 

For those that stay in the sector, there’s the chance to grow portfolios and explore new opportunities. Those keen to make a quick exit from the space may be willing to offer good deals on their property portfolio. 

And even much opposed legislation amongst the landlord community, such as EPC rating changes, could help create a generation of more cost-efficient, valuable rental homes for their owners, which would unlock a new range of benefits in the long-term. 

Whilst the mood in the sector is still gloomy, the horizon is starting to look a little brighter.