It’s a funny old world. Following the brutal tax changes intro-duced by former chancellor George Osborne, and the additional pressure from institutional landlords and the private rental sector, things were looking pretty bleak for amateur landlords this time last year – and were challenging even for professional landlords. But developments within bridging have gone some way to make up for this.
Equally, the absolute chaos of 2020 caused by the Covid-19 pandemic has, ironically, thrown both amateur and professional landlords a lifeline. When the country went into lockdown, everything changed in an instant; and, when the stamp duty holiday was announced in July, for landlords it was the icing on the cake. The use of bridging to acquire and add to portfolios has been nothing short of rampant.
Now, make no mistake: it’s not been an easy ride for landlords. Many have tenants taking protracted government-backed rent holidays, which has caused (and continues to cause) issues and financial headaches aplenty. However, for those who can pull through, and landlords are a resilient bunch, there are many reasons why things are looking up.
Retreat from high LTV
For starters, the retreat of lenders from high-LTV loans has been nothing short of staggering. With lenders expecting unemployment to rise sharply and house prices to fall proportionately, the availability of loans at 95 per cent LTV is as good as non-existent. Even at 90 per cent LTV, brokers tell us, finding a loan can be like searching for a needle in a haystack. It’s only at 85 per cent LTV that things start to pick up.
In short, for first-time buyers and anyone else with small deposits it is proving almost impossible to secure a mortgage on the high street. As a result, demand for rental property has already started to ramp up as FTBs realise the futility of even approaching a lender for a high-LTV loan.
The result of this hugely increased conservatism among high-street lenders? Landlords who, pre-Covid, were in a very challenging position have suddenly found their units back in high demand. And, if landlords are anything, they are alive to a commercial opportunity.
That commercial opportunity, of course, came in the form of the SDLT holiday, which has seen a dramatic surge in landlords adding to their portfolios, using bridging as a way to secure the right properties quickly.
One stick in the spokes, however, is that many landlords continue to struggle with the punitive stress-testing rules that apply to regulated lenders. We’ve benefited from this, too, as demand for our soft-launched, medium-term buy-to-let loan is so strong we’ve had to create a waiting list to roll it out to brokers.
Since the easing of the first lockdown, we’ve also seen a surge in refurbishment bridges. Partly, this is driven by landlords still being forced to manufacture value out of their portfolios to combat the tax changes. We’re still seeing a lot of houses being converted into multiple units, and bigger houses, once planning permission is secured, transformed into HMOs.
The other reason why demand for refurb bridges is strong is because landlords want to make themselves more attractive alongside PRS schemes, as hordes of would-be FTBs are forced into rental accommodation due to the radical new caution of high-street lenders.
Covid-19 has been the biggest curveball in most of our lifetimes but, for landlords, it’s definitely thrown many a much-needed lifeline.
Mark Posniak is managing director of Octane Capital
