I say this with caution but, thankfully, things seemed to have calmed of late. If that sounds a little unsure, it is only because the bond vigilantes still have us on probation after September’s disastrous mini-Budget.
As is only natural at this time of the year, the mind tends to wonder what the next 12 months have in store for us.
However, predicting anything in the current market is a fool’s game. So instead, here are five things I’d like to see throughout the course of 2023.
The government to give landlords certainty on EPC legislation
Landlords are in limbo when it comes to the government’s mooted EPC legislation.
As a reminder, ministers are proposing that properties must have an EPC rating of at least a C by the end of 2025 for new tenancies and 2028 for existing agreements.
However, while the bill was introduced in November 2021, it is still only at the second reading stage. Or, in other words, it isn’t even a fifth of the way through 12-stage legislative process.
Frankly, that is unacceptable. How can landlords prepare for this when they don’t even know what the final rules will be?
At this rate, landlords will still be in the dark a year from now. That would be reckless and inconsiderate. Landlords need clarity – and soon.
Some perspective
There is no denying that 2023 will be a more difficult market than 2022 has been. UK Finance, the trade body, predicts purchase and remortgage lending to slump 27% and 22%, respectively, in 2023.
Clearly, all of us would like to see market growth. However, let’s put this into perspective. If buy-to-let lending does indeed come in at £43 billion, as the trade body predicts, it will still be the fourth best year for lending this century. That is something we shouldn’t forget.
Lenders to realign their stress test rates
As I have mentioned in a previous article, some buy-to-let lenders are still employing overly onerous stress testing requirements for borrowers. Some seven years ago, the Prudential Regulation Authority set out affordability and stress testing requirements designed exactly for moment like this, when rates are rising.
However, we have a situation when, in my opinion, some areas of the market are being too cautious. Of course, that is their commercial choice, but one also cannot deny that it is constricting a market that is already predicted to shrink next year.
Recognise the vital role landlords play
For some people, landlords are the new bankers. It never ceases to amaze me that even those in government try their hardest to bash a cohort of people that provide vital quality housing to some 4.5 million households in this country.
While I am certain Ministers will not roll back any of the punishing taxes and regulations they have forced on landlords over the years, it would be welcomed if owners of private rented properties were not targeted further in the New Year.
Swap rate stability
September’s mini-Budget caused UK markets to spasm and, as a result, has significantly further pushed up the cost of funding for lenders.
In a year, two and five-year swaps rates have risen by more than 300 basis points. Although their rapid upwards trajectory has slowed of late, thankfully.
If they remain fairly stable – and that’s a big if – it will allow lenders to reduce the price of their fixed rate mortgages, which would be a welcome development given the current economic backdrop. Here’s hoping.
David Whittaker is chief executive of Keystone Property Finance
