After six or more months of rising buy-to-let (BTL) mortgage interest rates, and at an increasingly breathless pace, the industry has hit the next hurdle.

At the time of writing, six BTL lenders have entirely withdrawn from new business in the past month, with only two of them returning to trading after a week or so.

This figure doesn’t include the swathe of lenders that have significantly reduced their offerings to just a few 60% LTV deals. And I doubt we’ve seen the end of it.

I think it’s better for lenders to admit when they’re drowning in business

This is unprecedented, especially given we’re not in a 2008-esque financial crisis (thank goodness). So why are lenders closing their doors when, arguably, there’s still money to be made?

Without wanting to sound like a broken record (or insult your intelligence), erratic swap rates and at least five Bank of England base rate rises have wreaked a little havoc on lender profit margins of late. We tried to warn borrowers of this incoming storm before Christmas 2021, but the full force only really hit the shore, and property investors’ attention, in the past three months.

Queue the sudden scramble to lock in for five years (or more) as quickly as possible.

Fallout

The fallout? Lenders aren’t coping with the volumes. Neither are solicitors, nor local authorities. This isn’t a blame game; it’s just there are only so many applications a team can cope with at once while maintaining any kind of decent service level.

I’m sure the grumbles in our office about service times and last-minute rate withdrawals are echoed across most BTL broker establishments. Of course, this has only been compounded by lenders being — understandably — unable to extend offers in order to maintain any kind of profit margin.

Ultimately, this is just a momentary blip. Similar to the madness of the stamp duty holiday deadline

Entering the fray: frustrated clients. I’m treating it as a test of my communication and service skills. As long as you keep clients in the loop and reassure them you’re doing everything you can, they usually get it.

Still, this all has a wider impact. If one lender withdraws or vastly reduces its mortgage product range, we brokers flock to the next-best lender option, putting more pressure on their systems; so a cycle begins. The summer season has only added to the farce as the whole system enters holiday-cover mode.

What will break this cycle? When can we return to ‘normal’? I’m sure the pressure will ease once the schools are back and the holidays behind us.

We tried to warn borrowers of this incoming storm before Christmas 2021

Of course, we still have at least three Monetary Policy Committee meetings before the year is out, and the latest predictions foresee us entering 2023 with the base rate at 3%. Goodness knows what swap rates will do; five-year swaps just leapt from around 2.4% to 2.99%! Consequently, I don’t envisage the high turnover of mortgage rates letting up soon — not until inflation is tamed into a more manageable beast.

I think it’s better for lenders to admit when they’re drowning in business and temporarily withdraw highly competitive ranges or even close their doors. It’s honest, and it protects the live applications from further delays, which we simply don’t have time for when it’s not possible to extend offers further.

House prices are finally coming off the boil, albeit slightly. Recently revised predictions from Knight Frank still anticipate house price growth to be higher for the year than originally thought, up from 5% to 8% as a UK average. And the five-year projections remain comforting, at 17%.

Lenders aren’t coping with the volumes. Neither are solicitors, nor local authorities

Ultimately, this is just a momentary blip. Similar to the madness of the stamp duty holiday deadline when, again, service slowed right down and some lenders shifted around product offerings to better manage business levels. Granted, inflation at 40-year highs (currently 10.1%) will likely prolong this turbulence, but things should settle as we enter 2023.

I know it’s stressful, but it’s forcing us BTL brokers to be creative and improve our customer service.

It’s true what they say: the fun never stops.

Jeni Browne, sales director, Mortgages for Business