Two thirds of buy-to-let mortgages being transacted in quarter 1 this year, are re-mortgages of existing properties owned by landlords – according to Mortgages for Business.
Managing Director, David Whittaker says: “Record low mortgage rates are driving wave upon wave of landlords to reassess their finances.”
“A great deal agreed last year may be uncompetitive by today’s standards. So this stampede is completely rational – it represents a charge by landlords to make the most of an unprecedented economic situation.”
Since the banking crisis, lenders have been reluctant in the buy-to-let re-mortgage sector because of falling house prices and the risk of negative equity. To counter this, the most attractive mortgage offers have been where the landlord has 40-50% equity.
Above these levels, the rates and fees were punitive thus driving landlords to remain with their existing products.
Yet in recent times we can see that lenders are slowly relaxing their lending rules on buy-to- let re-mortgages. If we examine the average value of the re-mortgage BTL loans offered in Q1 as a percentage of the average property value (Loan to Value – LTV) we can see the lenders are upping this percentage.
For landlords who rent ‘Houses of Multiple Occupancy’ (HMO’s) in quarter 4 of 2014, the average loan offered was just 62% of the value of the property. This has risen in Q1 of 2015 to an LTV of 70%.
It really is the case that a landlord with a buy-to-let mortgage who hasn’t reviewed this financial arrangement in the past 12 months, should do so quickly. Whilst there is no expectation that the current crop of favourable BTL re-mortgage products is soon to disappear, landlords can make big savings by switching their mortgages and release equity for the next project.