www . simplybizmortgages . co . uk
21
Healthy Q4 for BTL with product choice and remortgaging opportunities
The Buy-to-Let market has been buzzing with activity this year , even August which was traditionally a slower month saw more activity than usual .
Paul Brett
Managing Director , Intermediaries Landbay
At Landbay , we had our best August to date . September was also strong and so is our pipeline business and we watch the final quarter of this year to continuing to be busy .
Obviously , the stamp duty holiday has helped to fuel demand and even now that it ’ s over landlords are keen to grow their property portfolios . We have heard about landlords leaving the market and selling up but from what we are seeing most of these are amateur or accidental landlords . This void is being filled by professional landlords who see opportunities to expand their business .
Product choice and competitive pricing
For those property investors who require mortgages , the number of products now available has almost doubled to 3,000 in the past 16 months . Figures from Moneyfacts show that in May 2020 there were 1,455 BTL products on the market but by the end of September 2021 numbers had reached 2,987 .
This choice also features some competitive pricing and at Landbay we have been reducing our rates throughout the whole of this year . This includes discounts on green mortgages , which we introduced in June .
There has been much interest in green mortgages recently , especially as rules are due to change in 2025 with new rental properties needing to have a minimum EPC rating of C . Properties with existing tenancies have until 2028 to get their houses in order . However , responsible landlords are starting to look at what they need to do to make their rental accommodation energy efficient as they can before it becomes a necessity .
Five-year fixed rates maturing
October and November were busy months for five-year fixed rate mortgage maturity and remortgaging those deals . This is by far the most popular mortgage product , not just in Landbay ’ s mortgage portfolio but across the sector . Around three quarters of our mortgage book consists of five-year fixes and one of the reasons for this is that the affordability stress test is lower than on twoyear products .
In 2016 the Prudential Regulatory Authority introduced affordability rules whereby lenders must ensure borrowers can afford to repay the mortgage if interest rates rise within five years . This stress test is set at 5.5 % and must be applied on two-year fixed rates .
But it does not apply to five-year fixes and we can use a stress test rate that is equivalent to the mortgage rate . For example , the rate on our standard 75 % LTV for BTL remortgages is 3.24 % ( correct at time of going to press ) and has a free valuation . That rate is a big difference to having to stress test at 5.5 % and means the client can borrow more money .
Another contributory factor to the popularity of longer-term fixes is the marginal difference between the pricing of two and five-year fixed rates . Over the past five years , more borrowers have wanted the stability of a longer-term rate and that will continue in today ’ s environment .
Brokers and lenders will have been busy in Q4 especially with remortgaging business but also purchase remains a vibrant part of the BTL market .
landbay . co . uk