According to a recent survey by specialist buy-to-let lender, Foundation Home Loans, many landlords are expecting to remortgage their buy-to-let properties within the next twelve months. The survey was taken by over 750 buy-to-let investors and it showed that 30 percent of those who responded are planning to remortgage in the next year.

The proportion of portfolio landlords looking to remortgage is most impressive with 43 percent saying that they would like to do this during the next 12 months. 

The survey also showed that 30 per cent of those looking to refinance their properties want to release equity. This is clearly an opportune time for landlords to consider capital raising as property prices have been on the increase, giving buy-to-let investors more confidence in the sector.

With property prices on the rise, landlord clients may be able to access lower LTV mortgages at better rates and allow them to release more equity. Landlords may release equity from their portfolios for a variety of reasons and providing a deposit for further property purchases is still a common plan for those looking to grow their investment property business (despite Stamp Duty reverting to pre-Covid rates).

Another reason to be alert to the buy-to-let remortgaging opportunity is that many 5 year fixed rates will be maturing in the next 12 months, contributing to the upward trend for refinance cases. Some landlord clients may also be in a better position to obtain shorter term fixed rates as rents have reportedly been rising in most areas of the UK, allowing applicants to meet lender stress tests more easily.

Releasing equity in order to carry out home improvements is also a common theme. With more people now working from home due to Covid, projects such as a loft extension, self-contained annex or garden office can add value to a property and also increase the amount of space available for more flexible home working arrangements.

Landlords may also be using any void periods to make improvements to their rental properties or carry out essential repairs. There is also an incentive to raise capital for making energy efficiency improvements to rental properties and achieve a better EPC rating. Currently all rental properties must have an EPC rating of at least E, but there are government ambitions for the minimum standard to reach a rating of C or above by 2028.

Buy-to-let investors with an eye on the future are starting to carry out improvements such as installing insultation, upgrading boilers or replacing windows in order to achieve a higher rating. There has also been the emergence of ‘green mortgages’ for landlords, with lenders offering incentives or discounts for more energy efficient rental properties.

From July 1^st the zero rate stamp duty threshold was reduced from £500,000 to £250,000 and on 1^st October it will revert to £125,000, so there is still time for those purchasing properties to make some savings. Although buy-to-let property investors pay a 3 per cent surcharge, the stamp duty holiday has created a boost in rental property purchases over the last 18 months.

Despite the stamp duty incentive coming to an end, there are still strong drivers for landlords to maintain their portfolios and look for opportunities to make additional property purchases. Average rental yields across England and Wales remain strong and recent data published by Fleet Mortgages supports this.

According to the data, landlords benefited from an average rental yield of 5.6 per cent in the second quarter of 2021 with some interesting regional variations. Year on year, Yorkshire and Humberside had the biggest increase rental yield rising from 6.1 per cent to 7.2 per cent.

Although London has suffered during the pandemic with falling rents, it is likely to recover well once the capital city opens up more fully following the enduring lockdown measures.

For landlords seeking to remortgage, release equity or expand their portfolios, buy-to-let lenders in the marketplace continue to demonstrate their appetite to lend. Increased competition means that buy-to-let mortgages are keenly priced and there are now more options available at higher loan-to-values (LTV), particularly in the 80 per cent LTV bracket.

This bodes well for buy-to-let brokers who are looking to write more business with their landlord clients as there is a good choice of products for most scenarios. The complex buy-to-let mortgage market is also flourishing and specialist lenders are perhaps being used more than ever before, especially for cases that don’t fit with mainstream providers.

It also appears that complex buy-to-let lenders are in favour with the intermediary community according to recent research by Smart Money People. The research involved 597 brokers who were asked to rate 44 different mortgage lenders from across the industry. 

The complex buy-to-let lenders included in the research were rated highest by brokers for flexibility with a score of 96 percent, followed by mainstream buy-to-let lenders with a score of 87 per cent. This underlines that within the buy-to-let mortgage sector, brokers value being able to deal with lenders that have a flexible approach to underwriting especially for more complicated cases.

However, the complex buy-to-let lenders only scored 67 per for their ease of use compare with 80 per cent for mainstream lenders. This is perhaps unsurprising as complex cases normally involve more thorough underwriting practices and have greater supporting evidence requirements.

Buy-to-let intermediaries can take confidence from a recent report from Hodge which showed that nearly three quarters (73 per cent) of portfolio landlords use a mortgage broker to arrange finance for their buy-to-let properties. Furthermore, 71 per cent of large portfolio landlords (£2m- £50m portfolio value) said that using a mortgage broker had saved them money.

This clearly highlights the value placed on buy-to-let mortgage brokers and an appreciation for the service they provide to their landlord clients.