Some brokers have called for more lenders to offer buy-to-let mortgages, arguing there is a demand for it.
It’s a niche area, with Moneyfacts data showing nationwide out of 2,199 buy-to-let products across 75 providers there’s only 16 buy-to-let offset mortgages offered by five lenders.
Dean Mason, a self-employed broker at Masons Financial Planning, said more products would be useful for landlords who could draw money out of a savings account to fund refurbishments and purchase properties at auctions in future.
He said: “Buy-to-let landlords want quick access to their money tied up in their properties and having an offset mortgage on their existing properties gives them that flexibility and a pot of money to draw on to invest.
“I get a lot of buy-to-let landlords who want flexibility to put money aside and either use it or draw it out and even put money aside for tax bills. It seems to me it’d be tailor made for the buy-to-let market to offer, but lenders say there’s no call for it.
“There’s a whole concept in offset mortgages which fits so seamlessly into what a buy-to-let landlord would want and the flexibility they need.”
Payam Azadi, director of Niche Advice, said it’s a good product from a professional landlord’s perspective because you can draw down from funds when needed rather than doing a remortgage or getting a bridging loan.
He added: “There’s demand for buy-to-let offset mortgages. We like the product changes made in the sector and the more innovative the products the better.”
David Hollingworth, associate director of communications at L&C Mortgages, said additional pressures on landlords, like the reduction of tax relief on mortgage interest, means they are more focused than in the past on keeping their costs down and their interest bill to a minimum,
He said: “I’ve always thought they were a good idea. We’ve seen people that have liked the idea of them in the past. Landlords could put spare income into the offset account but retain easy access to it, which I think they quite like.
“With mortgage tax relief changing, offset could be an attractive kind of product for landlords as they’ll be more focused on keeping their interest bill lower.
“I’m not saying there’s a huge market there and loads of landlords would flock to it, but I think some would like the flexibility that offset gives them.”
Dilpreet Bhagrath, mortgage spokeswoman at online mortgage broker, Trussle, agreed and said after the amount of tax relief that landlords can claim on their mortgage was significantly reduced, many will be considering other routes, such as offset mortgages, to reduce costs elsewhere.
She said: “Offset mortgages are alluring for some buy-to-let customers, with the reduced interest that comes with an associated savings pot.
“This approach might hold more appeal for investors who want to be more agile when managing their costs.
“However, there’s often a premium associated with offset products and rates can be higher than the standard rates. Landlords should speak to a broker to balance their personal circumstances with how much they’ll use the offset provisions, to ensure it benefits them.”
Family Building Society offers two buy-to-let offset mortgages, something which the society’s director of business development, Keith Barber said receives positive feedback every time he mentions them at broker roadshows.
He said: “It’s one of those financial planning tools that astute investors will use because it’s to their benefits and the sort of product advisers should be aware of when helping buy-to-let investors make the most of their assets.
“I’m all for competition and innovation from lenders. I think there should be more buy-to-let offset products, but it’ll never be a dominant product line in the market.”
By Michael Lloyd
Source: Mortgage Introducer