October 18, 2024 2:01 pm

Insert Lead Generation
Nikka Sulton

Landlords are currently experiencing uncertainty regarding their investments in new properties, primarily due to the looming possibility of increased Capital Gains Tax (CGT) rates and the implementation of new Energy Performance Certificate (EPC) regulations. These potential changes are creating a climate of caution among property investors, leading them to reconsider their strategies for property acquisition and management. 

Acre, a prominent mortgage intermediary platform, has facilitated over £24 billion in mortgage transactions so far this year. This impressive figure underscores the significant activity within the property market, despite the growing concerns among landlords. The platform’s extensive transaction volume reflects a continuing demand for property financing, but the uncertainty surrounding tax changes may hinder further investments.

Recent analyses of transactions indicate that landlords are taking a more cautious stance by closely examining their rental portfolios. In anticipation of potential CGT reforms, they are evaluating their liquidity and overall financial positions. This proactive approach is essential for landlords as they aim to navigate the unpredictable landscape of property investment and ensure their portfolios remain viable in the face of regulatory changes.

Data from September reveals a notable trend in landlord behaviour, as property owners leveraged their assets more than at any other time this year. The Loan To Value (LTV) ratio peaked at nearly 72%, illustrating a shift towards increased borrowing against their properties. This trend not only highlights the immediate concerns landlords face but also emphasizes their attempts to maximise cash flow while preparing for potential reforms in the near future.

While some landlords are choosing to take on more debt in light of potential regulatory changes, Acre’s analysis indicates that others are reconsidering their investment strategies. This shift in approach has led to a notable increase in the volume of buy-to-let (BTL) purchases and mortgages that are being halted or abandoned. Currently, nearly 10% of such transactions are not proceeding because landlords are opting out of the market.

This trend reflects a growing caution among property owners who are evaluating the risks associated with potential Capital Gains Tax (CGT) rate hikes and new Energy Performance Certificate (EPC) regulations. As landlords weigh their options, many are prioritising financial stability and liquidity over expanding their property portfolios, which could have significant implications for the rental market in the coming months.

 

Further analysis of the buy to let (BTL) mortgage market found that :

  • The average loan-to-value (LTV) ratio for buy-to-let (BTL) purchase cases has increased by 2.5% over the past year, reaching a high of 71.75% in September 2024. This rise indicates that borrowers are opting for larger loans in relation to the property’s value, which may be due to a desire to leverage more debt, a willingness to make smaller deposits, or a reaction to lower mortgage rates that encourage financing a greater portion of their purchases.
  • Moreover, the volume of BTL purchases and remortgage cases that are not proceeding has grown throughout 2024. The percentage rose significantly from 6% in August to 10.5% in September. Additionally, the abandonment rate for BTL applications due to clients deciding not to proceed for business reasons has surged from 1.2% to 8% over the last three months, highlighting that landlords are reassessing their property portfolios. 
  • In September 2024, BTL purchases accounted for 4.9% of all new mortgage applications, a decline from nearly 6% the previous year. This drop suggests that many landlords are choosing to exit the market rather than acquire new properties, likely in anticipation of upcoming tax and regulatory pressures. In contrast, BTL remortgage cases have remained stable, making up 8.19% of all mortgage applications. This stability indicates that existing landlords may be focused on optimising their finances through remortgaging rather than seeking new investments.
  • The average LTV for BTL and BTL remortgage cases stood at 61.5% in September 2024. An Acre spokesperson commented, “We are witnessing how landlords are adjusting their financing strategies in response to concerns about upcoming changes in Capital Gains Tax and Energy Performance Certification regulations. They are becoming more cautious to avoid over-leveraging their investments and to maintain liquidity. This trend is likely to persist following the Chancellor’s statement at the end of the month, unless her budget proposal significantly differs from current market expectations.”

These findings are derived from a thorough analysis of mortgage cases processed through Acre’s intermediary platform. The data focuses on cases that were entered into the system between September 2023 and October 2024, providing a comprehensive view of the market during this period.

By examining these specific timeframes, Acre aims to highlight key trends and shifts in the buy-to-let market. This analysis allows stakeholders to understand how various factors, such as changes in regulations and market conditions, are influencing landlord behaviours and lending practices in the current property landscape.

 

 

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