A majority of buy-to-let landlords are applying for larger loans as market conditions encourage borrowers to buy more expensive properties and diversify their portfolios.
According to buy-to-let lender Keystone Property Finance, three in five of its customers applied for a mortgage in its larger loans range, which offers loan sizes between £250,000 and £1m, since December.
The lender said the popularity of larger loans could be due to landlords being able to afford more expensive properties as a result of the stamp duty holiday.
Elise Coole, managing director of Keystone Property Finance, said: “Our data shows that landlords remain confident about the buy-to-let market, with the majority of customers looking to secure a larger loan to purchase their property.
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“Undoubtedly, the [stamp duty holiday] has played an important part in this and has presented landlords with an excellent opportunity to bolster their portfolios and invest in higher value properties.”
Chris Sykes, associate director and mortgage consultant at Private Finance, said with possible rent arrears during the pandemic, this had partly encouraged landlords to consider diversifying their portfolios, thus requiring larger loans.
A November survey from Citizens Advice found half a million private renters were behind on their rent. MPs have called on the government to support tenants to repay rent arrears caused by the pandemic, including funds for landlords to help them receive income and avoid evictions.
Sykes said: “We have many portfolio landlords who traditionally only did single let family homes for example, who now are looking into houses in multiple occupation, multi-unit freehold blocks, holiday lets, etc.
“Many are even going further afield than that and are looking into commercial or semi-commercial property or development opportunities for higher yields, perhaps more hands-on investments but the profits often are considerably higher and [often require] larger loans to get things done.”
Data from Hamptons shows 15 per cent of all sales agreed in November were to landlords, the highest figure for four years, with investors “rushing to complete” their purchases before the original stamp duty holiday March deadline, according to the estate and letting agent.
Matthew Fleming-Duffy, director at Cherry Mortgage & Finance, said his firm had seen over 60 per cent of its business come from landlords between December and mid-March.
Likewise Aaron Strutt, product and communications director at Trinity Financial, noted demand from borrowers purchasing expensive buy-to-let properties due to cheap rates.
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Strutt said: “We are getting more calls from borrowers who are keen to purchase an investment property.
“There are a lot of landlords with £250,000-plus mortgages keen to remortgage and get the best possible deal. There is also demand from borrowers purchasing expensive buy-to-lets because of the cheap rates.”
The figures from Keystone Property Finance also found that three in five applications (62 per cent) for its larger loan products were from landlords registered as a limited company.
Mark Harris, chief executive at SPF Private Clients, said his firm had seen a marked interest in setting up a buy-to-let limited company.
Harris said: “We have seen significant interest from landlord clients with regard to switching to a limited company and lenders are recognising this with a wider range of products at competitive pricing.”
By Chloe Cheung
Source: FT Adviser
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