Brokers are seeing an increase in tenants offering a first refusal on BTLs

Mortgage brokers have seen an increase in inquiries from tenants who have been offered a first refusal to buy the property they are renting.

The buy-to-let market is currently undergoing a “profound transformation”, according to Harmony Financial Services director Imran Hussain, who said many landlords were looking at upcoming EPC requirements and deciding to sell at what is arguably “the top of the market”. ”.

A number of brokers saw the same trend, while some said it was a welcome break for a small percentage of renters who needed help moving up the property ladder.

Concessional purchases

Mansfield-based mortgage broker Lewis Shaw said the uptick in inquiries had been “huge” as many tenants he dealt with were offered a gifted piece of equity by their landlord.

“Increasingly, hobby owners are deciding to quit, sell at a time when prices are at an all-time high, and move away into the sunset,” Shaw said.

“For landlords buying to let, selling to their tenants makes perfect sense: they can ask agents what the market value of the property is, then sell directly to tenants to avoid costly agent fees, not to mention the hassle of s involve in chains.

“Furthermore, any price reduction that tenants can use for their deposit essentially reduces the capital gains tax payable by the landlord on the sale,” Shaw added.

PFEP Wealth Management managing director Richard Bishop also noted an increase in the number of clients reducing their property portfolios.

Bishop said: ‘All of our individual property investors have now sold due to additional EPC legislation, increased tax burden and loss of mortgage relief and are trying to squeeze out tenants.’

Of Bishop’s customers who have sold their rental properties, 80% have sold them to their tenants.

But that option won’t be as attractive as mortgage rates rise, Bishop warned.

“If mortgage rates rise above 2.5%, most investors could lose money because the rental will not cover the mortgage payments – there is currently some lag with the investor on a fixed rate,” said Bishop.

Tembo’s advice manager Kirsty White said they are also seeing this trend and it may be attractive to tenants who will feel confident buying the property after living there for some time.

But while this may be attractive to some first-time buyers who have a suitable credit history, it adds to concerns about the dwindling housing stock and the pressure this will put on remaining tenants to cope with reduced supply and higher rents.

National Residential Landlords Association policy director Chris Norris said with landlords leaving the area and tenant demand being so high, it’s a recipe for “higher rents and less choice, making the access to property more difficult for those who want it”.