While the Bank of England recently voted to hold the interest rate at 4%, which will have been disappointing news to landlords who had hoped for a rate cut this time around, the narrowness of the vote and the more dovish tone of the minutes suggest the door remains open for a rate cut in December, raising expectations for the MPC’s next meeting. KPMG expects the base rate to fall to 3.75% by the end of the year.
The Bank also suggested inflation peaked in September and will dip from 3.8% over the coming months – “on a gradual path downward,” according to the Governor – before settling at the 2% target rate in 2027.
Disinflationary pressure now appears well entrenched across the economy; food price inflation is particularly pronounced. And while no one likes to see income taxes rise, if taxes rise on Budget Day, that will put further downward pressure on inflation.
With the outlook for inflation and rates improving, the costs of funds for lenders are already starting to reduce. Lower swap rates have enabled lenders to cut mortgage rates.
There has been a raft of cuts to fixed rate mortgage products already with several major lenders trimming back their rates in the last couple of weeks.
Nationwide and Lloyds and Halifax launched new rates recently, as has Landbay, with cuts across our entire buy-to-let range, including our Premier suite of products. The expected cuts to the base rate are therefore already being priced into fixed rate mortgage deals.
Of course, for existing buy-to-let landlords on fixed rate products, the headline interest rate may not have shifted. But the good news is that mortgages are already more affordable given we have had five rate cuts since last summer when the base rate sat at 5.25%.
Furthermore, landlords are feeling less of a need to buy down their mortgage rate with higher product fee options. We’ve certainly seen in recent months a shift towards lower fees.
No wonder, then, that landlords are feeling more confident. In our latest research into landlord sentiment, we found positivity among buy-to-let landlords has more than doubled since last year’s Autumn Budget.
More than a third of landlords (36%) told us they are feeling positive about the future of their buy-to-let businesses – up from just 18% in the wake of last year’s Autumn Budget.
Meanwhile, the number of landlords feeling negative about their future business prospects has declined – from 43% following the Autumn Budget, to just 21% now.
This reflects the findings of research we conducted earlier in the year that found 58% of landlords remain committed to the private rented sector, with no intention to sell any of their properties in the next 12 months. That represented a big jump from just 47% the year before.
Furthermore, buying intentions have also rebounded, with 52% of landlords intending to purchase new rental properties in the next 12 months, up from just 27% in the previous year’s survey.
Among those with no plans to sell, the strongest intention came from non-portfolio landlords with fewer than four mortgaged properties (32%), closely followed by more than one in five (24%) who own portfolios of between four and 10 rental properties. But most landlords are looking to stay in market and even grow their portfolios.
While we found some appetite to dispose of portfolios, we found fewer than one in ten intend to sell up to 50% of their properties. Even this isn’t a particularly bad sign; selling properties is just a natural part of developing a successful portfolio.
Our latest findings chime with the data released in the quarterly Rental Trends Tracker from Rightmove. That showed the number of available homes to rent is now 9% higher than this time last year.
Though that figure is still 23% below this time in 2019 – it’s the closest to pre-pandemic levels of supply for four years.
Once again buy-to-let landlords are demonstrating just how robust their businesses are. In the face of increasing operating costs and the impact of new legislation, landlords are staying positive.
If nothing else, this is a huge win for renters; while rents outside London are currently rising 3.1% a year, imagine how much higher they’d be heading if more landlords were selling up?
The outlook for buy-to-let is bright. With the Bank of England’s dovish stance paving the way for a rate cut in December, inflation on a downward trajectory, and mortgage pricing easing, the fundamentals are aligning in landlords’ favour.
Add in wage growth supporting tenant affordability and a rebound in landlord confidence, and the PRS looks remarkably resilient.
This is not a sector in retreat. This is a sector that is adapting to challenges. A sector that is poised for growth.
At Landbay, we are proud to back that momentum – whether through better rates, innovative products, or tailored support for landlords ready to stay, scale, or succeed. The door is open. Let’s step through it together.
