Your Roadmap to 2024 Investment Success

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Property Investment Trends for 2024

In the discussion of the mortgage market and pertinent considerations for buy-to-let investors in 2024, Kaizuki Topham, one of the founders of RedCardinal, offers valuable insights into property investment trends for 2024.

The preceding year has presented challenges for all participants in the mortgage market. Distinct economic factors have given rise to a volatile economy, resulting in heightened inflation, Bank of England base rates, and increased funding costs for lenders.

The economic uncertainty has had a direct impact on mortgage rates, causing lenders to grapple with market dynamics in pricing mortgages accordingly. This flux has led to a constant state of rate changes, inducing heightened client anxieties. Consequently, financial products have been introduced and swiftly withdrawn from the market.

Amid this uncertainty, one certainty stands out: adopting an operational mindset and implementing a risk mitigation strategy is crucial for preparing for long-term investment plans. This is especially true for buy-to-let (BTL) investments, which stand to benefit from defined goals, periodic reviews, and diversification. BTL investments should be monitored akin to pension plans.

In this context, there are three primary areas of cash flow risk associated with BTL investments: void periods, tenant attrition and associated letting finders fees, maintenance, and interest rates. Diversifying property types and tenant profiles emerges as a protective strategy against increased cash flow risks, safeguarding the portfolio rather than individual properties.

Looking ahead to the next 12 months, the property investment landscape in 2024 poses several challenges:

Property Investment Challenges

Next year promises an intriguing economic landscape. Inflation has subsided, and lenders are gaining confidence in pricing their mortgage products. The challenge for lenders lies in keeping rates as low as possible to facilitate clients reaching the 75% borrowing threshold, a concern particularly affecting re-mortgaging.

Rental Stress Test

For BTL investments, rental income is often a key determinant of affordability. Passing a rental stress test is imperative, demonstrating to lenders that the rental income can withstand rate fluctuations. The challenge lies in re-mortgaging clients from a low-rate product to a new high-rate product.

Return of Competitive Rates

Lender funding lines, at the time of writing, can cost up to 5% for lending money. Balancing this cost to keep BTL viable necessitates rates staying under 6%. Competitive rates are emerging, but they are accompanied by higher-than-usual product fees, serving as a means for lenders to cover costs without raising interest rates.

Despite the challenges, lenders are cognizant of client risks and the cash flow concerns. Proactive measures and solutions are in the offing, and investors can take steps to address these challenges:

  • Maintain credit profiles.
  • Engage in the fact-find process.
  • Discuss strategies and financing options with specialist brokers.

Understanding your current rental stress tests is crucial. If you own a property, understanding how much you can borrow during refinancing is essential. This is particularly relevant to resolve any failing rental stress tests.

Always focus on long-term goals and, in doing so, take this opportunity to reassess your investment motives, considering property investment trends for 2024. Solutions to mortgage hurdles exist, and exploring alternative approaches with a qualified broker can reveal previously overlooked options.

In Summary

  • The mortgage market is experiencing reduced volatility, with lenders growing more confident in pricing mortgage products.
  • While product fees may be a short-term concern, advising clients to focus on the true overall costs over the long term is imperative.
  • Despite decreasing inflation, investors remain eager to capitalize on competitive property prices.
  • As we settle into a new normal, aligning client expectations with a realistic economic outlook is crucial.
  • Expectations indicate that rates will stabilize partway through the new year.

For your 2024 mortgage outlook, achieving a balance between optimism and pragmatism is essential. RedCardinal is ready to assist with any property investment concerns – reach out, and we’ll be delighted to answer your queries.

Find out more about what’s happening in the property market in our News column.

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