Ratings agency positive on BTL outlook

The Fitch ratings agency are confident strong rental demand will manage to outweigh any detrimental impact from the stamp duty changes. 

However, the agency shared its concern for the future growth of the sector if the Bank of England  goes forward with regulation proposals, including affordability tests requiring landlords to meet  minimum interest rate stress of 5.5%.

Fitch comments: 

“The proposal does not set limits on loan-to-value, debt-to-income, or interest coverage ratios. If these were adopted, this could make buy to let less attractive for landlords if rental yields do not rise sufficiently to offset the impact of such affordability rules. This could have a knock-on impact on buy-to-let lending volumes and RMBS [residential mortgage backed securities] prepayment rates.”

The agency also noted that future performance of the sector would also be dependent on future net migration levels.

Fitch comments: 

“Demand will keep rental yields attractive even as property prices rise, and give affected landlords the option of raising rents, rather than forcing them out of the market. If the tax changes discourage new buy-to-let entrants, this could be another constraint on availability that supports higher rents.”

“Government initiatives to support homeownership and boost housing supply will take time to bear fruit, and we forecast UK house prices to rise by 4%-5% this year,”

Read Fitch's full release on BTL sector



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