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Buy-to-let remortgaging is on the up

As we emerge out of the latest Covid lockdown we are seeing an increase in interest around remortgaging in the buy-to-let market.

BTL is a buoyant sector, you only have to look at the number of lenders who specialise in it as a well as most mainstream lenders. There is certainly choice for borrowers and rates are competitive.

The BTL sector has increased every year from 2009 to 2019, representing a decade of growth following the global financial crisis.

In 2008 there were 114,740 BTL remortgages but in 2009 cases fell sharply to 32,850 as a result of the GFC. In monetary terms the drop off was £14.61bn down to £3.39bn in 2009.

The figures from UK Finance show how the BTL market has grown since then and in 2019 remortgaging peaked at 187,900 loans with a value of £31.1bn.

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Then the Covid pandemic came along and led to a fall in all lending with BTL remortgaging numbers going down to 163,300 in 2020 and a subsequent fall in value to £27bn.

But we are seeing a pick-up now with Q1 2021 rising compared to the previous quarter as 39,700 loans were issued at a value of £6.9bn.

Remortgaging for equity

These figures resonate with us as we are also seeing a rise in remortgaging especially for people wanting to take out more equity.

Talking to our underwriters, most borrowers want to use the extra money for further property investment. I would say this applies to around 70% of our landlord customers. A large chunk of our mortgage book is portfolio landlords, but it is also smaller landlords who are wanting to grow their investment property business.

There is a combination of factors here as to why that is. The stamp duty holiday has had an influence on landlords buying more property as there has been less tax to pay. Some landlords brought their buying plans forward to take advantage of the tax break.

Another influential factor is that house prices have been rising, therefore LTVs are lower, and more equity can be taken out. Coupled with the fact that many five-year fixes maturing this year, we expect remortgaging to continue an upward trajectory going forward.

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Home improvements

The other reason for borrowers taking out equity on their remortgage is for home improvements, and this applies to around 20% of our customer base. Some are using void periods to spruce up their properties, others are making repairs, but a newer reason has been to make properties more energy efficient.

Since 2018 all rental properties must have an Energy Performance Certificate (EPC) rating of at least E, but the government has its sights on all homes being rated C or above by 2030.

Astute landlords have been making improvements with changes such as cavity wall and loft insulation and installing new condensing boilers. But others are going further by replacing windows with double or triple window glazing and even installing solar panels.

We expect more landlords will want to improve their EPC ratings and quite a few lenders now are offering green mortgages as an incentive for them to do this, including ourselves. In our case, discounted rates are given for properties with EPC ratings of A, B or C.

By Paul Brett

Source: Mortgage Strategy

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This July was strongest for remortgaging in a decade

This July was the busiest for remortgaging in a decade, as there were 46,900 residential transactions worth £8.7bn that completed, UK Finance figures show.

This means that volumes were 23.1% higher than the same month in 2017 and by value there was a 26.1% increase year-on-year.

There was a similar trend in buy-to-let remortgaging, where 14,700 loans worth £2.4bn were completed, increases of 7.3% by volume and 9.1% by value year-on-year.

Jackie Bennett, director of mortgages at UK Finance, said: “The residential remortgaging market saw its strongest July in over a decade, as homeowners pre-empted the latest Bank of England rate rise by locking into attractive fixed-rate deals.

“There was also considerable growth in remortgaging in the buy-to-let sector, showing that while recent tax and regulatory changes are impacting on new purchases, many existing landlords remain in the market.”

The number of buy-to-let purchase mortgages completed fell by 14.1% year-on-year, with just 14,700 being completed.

Richard Pike, sales and marketing director of Phoebus Software, said: “While July is traditionally a busy month, it is clear that a number of people were kicked into action by the anticipation of the base rate rise.

“It was not such a rosy picture for purchases however. It is clear that consumer confidence is starting to take a hit, undoubtedly by all the talk of a no deal Brexit.

“Whenever there is uncertainty, people tend to put off making big decisions such as buying a new home. I expect to see more and more caution over the next six months as people wait to see what the outcome will be and what effect it will have on them personally.

“If ultimately, the result is better than expected, this could turn out to be pent up demand with a surge in house moves afterwards, but it could be many months before we see this come to fruition.”

Shaun Church, director at Private Finance, said: “Remortgage activity appears to be the main thing keeping the buy-to-let market afloat.

“Though punitive regulatory changes have dissuaded new entrants to the market, today’s data suggests many existing landlords are staying put.

“With mortgage costs often being one of landlords’ biggest expenses, swapping to a lower-rate deal is a sensible strategy for making a rental property more profitable.”

Source: Mortgage Introducer