This is going to be a busy year for BTL remortgages – lenders need to step up
by Andy Virgo, Buy-to-Let Director
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While we can expect the coming months in the Buy-to-Let market to be dominated by new business, holiday lets and a focus on upgrading properties to meet with EPC requirements; the remortgage market will also have a large role to play in 2022.
Within the mortgage industry January 2017 saw the introduction of the PRA’s new underwriting standards, requiring a more detailed assessment of a borrower’s personal finances and stress testing at a higher interest rate of 5.5%.
This made it more likely that landlords would need to provide larger deposits to secure the finance they need.
Meanwhile, the mortgage interest tax offset investors had enjoyed was radically changed in April, increasing costs for Buy-to-Let mortgage holders on top of the 3% SDLT surcharge that was introduced the April before.
There were approx 36 lenders on Q1 2017 compared to in excess of 50 now.
Those new underwriting standards, introduced by the Prudential Regulation Authority (PRA) combined with the low interest rates of the time to increase the appeal of mortgages fixed over longer terms hence the shift to 5-year fixed rates.
Read more: What holiday let investments can offer landlords in 2022.
With industry data showing a threefold increase in the number of five-year fixed rate mortgages written between December 2016 and January 2018, we’re anticipating a strong year in 2022 for remortgage business as many of these loans mature.
Fears of soaring inflation have led many to expect the Bank of England to further increase the base rate of interest throughout 2022 so borrowers may be keen to lock-in another loan sooner rather than later, offering an opportunity for brokers to hit the ground running after the festive break.
So how can we respond to these demands to offer the best deals for brokers?
Technology showing the way
Lenders not hamstrung by monolithic back office systems have been able to absorb the changes the PRA and Government have thrown at them over the years.
Indeed the ability for LendInvest to bolt upgrades onto our application portal and develop further integrations that result in frictionless enhancements to our own underwriting processes has resulted in service levels being met even with more to consider in the underwrite now.
Keeping the personal touch is obviously essential, which is why we make our underwriters and case managers available throughout the deal, but lenders who have been willing to innovate around the challenges posed since 2017 will be best placed to support fast refinancing now.
A better landscape
Today landlords are faced with a looming deadline to improve the quality of their properties in the form of both emissions and efficiency.
A plethora of Green mortgage products linked to the EPC rating of a property are available with discounts on both rate and fee compared to a standard product.
Making these deals available to landlords who haven’t had to refinance their properties for 5 years is also important, which is why we offer even cheaper rates when a landlord uses our bridging finance to improve their EPC rating, with free valuation and legals in the transition as well.
Noting the economic outlook and soaring inflation the option of longer term products have proved appealing to landlords with the LendInvest 7-year fixed rate option seeing huge take up.
With interest rates from 2.88% alongside a 1% product fee and ERCs covering just 6 years, what’s not to like for those looking to cement a mortgage payment during these uncertain times.
Managing portfolios
Landlords and brokers alike are benefitting from lenders’ increased knowledge and awareness of the choices open to portfolio landlords, especially when it comes to how tax is treated.
Portfolio incorporations are commonplace and as a lender supporting the portfolio landlord, making these happen smoothly is built into our processes.
We don’t need to underwrite a whole portfolio in the 6 months after 1 deal, making mass remortgages simpler, and tools like Open Banking and E-Signatures cut down on the laborious task of going through each deal at a time.
An evolving market
A lot has changed in the Buy-to-Let market in the past five years, and the measure of a good lender will be how those changes have been managed, embraced and overcome so as to make the returning landlord experience better than it was before.
This year offers a chance for all lenders to benchmark themselves against those measures and for landlords there’s plenty of choice and much to consider when remortgaging this time around.