Heading back to normality

By Andrew Ferguson, Managing Director, Buy-to-Let, West One Loans

If you can remember back to before the Covid pandemic, mortgage rates were very competitive, and pricing was towards the lower end of the scale with record low interest rates available. The mortgage market witnessed a strong start to 2020 and we had a positive outlook for the year ahead.

But that soon changed as it became clear that Covid was turning into a pandemic and the country was put into lockdown in March 2020. Uncertainty swept through the mortgage industry and we saw a significant reduction in product availability, and tightening of criteria, amongst the lending community because of the perceived risk.

The BTL lender community continued to function with a degree of normality, despite the uncertainties in the market and difficulties in obtaining valuations. However, pricing did increase both to control the flow of lending and to reflect heightened risk. Criteria was also tightened to make sure credit decisions were robust and sustainable. As a lender we continued to lend throughout the pandemic but in a controlled way.

Gradually, over recent months we have been returning to normal and coming more into line with what it was like before the pandemic in terms of pricing and lending criteria. Competition has returned to the market and we are extremely busy as demand for property and mortgage finance is strong. Despite the second lockdown in November, more optimism has prevailed with less of an impact on our sector, with valuations remaining available and an increasingly positive sentiment for the future as the vaccine roll out marches on at pace.

As a non-bank lender, we are funded by several institutions and via the capital markets. Pricing undoubtedly includes an element of competitive tension, however we price according to our own risk appetite objectives. The start of this year has been positive for West One with the introduction of new products and an enhanced BTL offering including an increase in our maximum loan size from £1.5m to £5m. The product improvements also saw a return to an 80% LTV product following a more stable economic outlook and we improved our pricing in our specialist range including HMO/MUBs, holiday let and expat lending.

Growth in BTL mortgages has been supported by the stamp duty holiday, introduced in July 2020. As a result of this incentive, we have seen a rise in the number of landlords wanting to enlarge their portfolio and interest from first-time landlords looking to invest in property.

Now that the stamp duty holiday deadline has been extended until 30 June and the threshold to start paying it has been raised from £125,000 to £250,00 for three months after that, it is going to be a busy time for mortgage lenders and brokers.

Buy-to-let remains attractive to investors as a long-term investment and from a lender perspective has proven one of the most resilient segments of the property market during these unprecedented times.