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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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Most profitable locations for buy-to-let landlords revealed

Brighton, Bangor, Portsmouth and Leeds are the top places for buy-to-let landlords, research from CIA Landlords has revealed.

Ranked at the bottom of the table is St Albans, with the poorest prospects for landlords this year, with some potentially making a loss of more than £700 a month.

Only six locations in London remain profitable, with the majority of boroughs losing money.

The research also reveals that profitability in the Capital has nearly halved since January 2020, amid a major exodus during the pandemic.

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Brighton remains the most profitable place to be a landlord for the second year running, with landlords in the coastal town making a monthly profit of around £570.

The findings, which took into account rental fees charged to tenants and landlord costs placed Bangor in second place (£500.53), Portsmouth in third place (£479.27), Leeds in fourth place (£477.60) and Lancaster in fifth (£474.54).

Bristol, Coventry, Manchester, Nottingham and Salford rounded out the top ten.

Stuart Williams (pictured), director of Thirlmere Deacon, said: “Over the last few months, some landlords have seen their profits dented due to the Chancellors’ tax measures that are only now taking effect.

“Undoubtedly, it is becoming more difficult for amateur investors to make a profit in the buy-to-let market due to legislation changes and financial pressures, there is still a lot of money to be made if landlords and investors make the right investment decisions.

“If investors can purchase cheaper properties with higher yields, they will have the opportunity to protect and boost their profits in the longer term. For example, an average residential property in London is around £500k with rental yields of circa 2%, while a flat in a good area of Manchester could cost half the price and generate 6-7% rental yields on top of 4-5% annual capital appreciation.

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“Landlords should review their existing portfolio to see if they can boost rental income and protect profits, by attracting a different market. Landlords will often find the best returns in urban areas, with a concentration of students and young professionals.

“It is also worth landlords considering setting up a limited company and using this structure to hold their properties.

“This will enable them to continue deducting mortgage interest when they are calculating profits. Landlords can also benefit from just 20% corporation tax, instead of income tax of up to 45%.

“Landlords need to do a serious portfolio review and work out how the tax changes affect them and what options there are to save, or make more money. For example, remortgaging to get a better deal or renovating some old stock – these costs will be tax-deductible.

“Alternatively, landlords could consider selling some properties or increasing the rent.”

By Ryan Fowler

Source: Mortgage Introducer

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One in 10 BTL landlords plan to add to portfolios

One in 10 buy-to-let landlords are currently planning to expand their property portfolio over the next few months, according to new research.

With buy-to-let continuing to deliver solid returns, a fresh report from Simply Business shows that 10% of buy-to-let landlords are planning to add to their portfolio in the near term, compared to just 3% at the end of last year.

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Despite a challenging time for the market, characterised by tax and regulatory changes, not to mention Covid-19, investment in buy-to-let continues to outperform most major asset classes, as demand from private renters grows.

With savers receiving poor returns from banks and building societies, thousands of people continue to turn to residential property as a means of supplementing their income, supported by low mortgage borrowing rates, growing demand from renters and the current stamp duty holiday, as buy-to-let consolidates itself as the investment of choice for many investors.

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Alan Thomas, UK CEO at Simply Business, said: “The coronavirus outbreak and consequent lockdowns have been transformational in UK renters’ attitudes towards property, and therefore where landlords are looking to make their next investment.”

He added “There appears to be a shift in terms of what is considered a desirable property by tenants, and residential landlords – crucial to both the economy and the local communities where they provide housing – along with the market in general, are reacting to this.

“What is clear though, is that the UK buy-to-let market is going through somewhat of a transition, driven by a move away from the previous demand for city centre properties.”

By MARC DA SILVA

Source: Property Industry Eye

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