"Investors were by far the most likely to look for alternative lenders to help them fund their purchases."
The current property market is challenging for all participants. Renters, landlords, high street banks - everyone is struggling to find a path forward. Although, property investors may be in a particularly unique predicament. If they can get over our current set of issues, opportunity may be just around the corner.
For Q3 2023, Market Financial Solutions surveyed a nationally representative sample of UK adults. This research focused on those who had applied for a mortgage in the year to July, either as a homebuyer, remortgager, or investor. While all three haven’t had the best of times over the last year or so, it’s property investors who appear to be struggling the most in the current market.
Of those who applied for a mortgage, 50% of all applicants saw it withdrawn by the provider while they were in the process of applying. Specifically, this hit 49% of homebuyers, and 32% of those who were remortgaging. But, this rose to 61% for property investors.
Meanwhile, the majority (54%) of property investors were turned down for a mortgage following affordability checks. This issue only affected 32% of those remortgaging, and 50% of homebuyers. Evidently, mainstream lenders appear to have limited appetite for riskier borrowers.
This is understandable albeit, probably short-sighted. If access to capital is restricted for property investors, that’ll likely lead to fewer landlords providing desperately needed rental stock. Conversion projects that could turn run-down high streets into thriving communities may be stopped in their tracks. Efforts to bring old homes up to modern environmental standards could be delayed, leading to costly repercussions.
Fortunately, there are reasons to be optimistic. Opportunity for property investors could be on the horizon. Of all the mortgage applicants we surveyed, investors were by far the most likely to look for alternative lenders to help them fund their purchases. Nearly 7 in 10 (68%) property investors are willing to look elsewhere, which is just as well considering how active they plan on being.
Despite having the best luck on the high street, only 43% of remortgage applicants are looking to purchase a new property when house prices fall, rising to 54% for homebuyers. But, 64% of investors are keen to expand their portfolios should prices drop.
For alternative, or specialist lenders, now may be the time to prepare for a flurry of activity. House sellers are cutting prices at the fastest rate in over a decade, according to Rightmove. We’re even seeing notable reductions in London, where property is rarely available at a discount.
Now may be an opportune time for borrowers and bespoke lenders to come together in harmony. This should be easy to execute. Specialist lenders like MFS are designed from the ground up to support investors in times when the mainstream options have all but closed shop.
We all need to act quickly though. Over the long-term, property prices rarely stay subdued for long. With inflation slowing down, and interest rates potentially nearing their peak, it may only be a matter of time until the wider market regains its confidence.
