Landlord remortgaging close to record levels
The proportion of landlords remortgaging is running close to record levels, according to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index, based on interviews with 201 mortgage intermediaries.
Intermediaries reported that 52% of buy-to-let mortgage cases in Q1 2018 were for landlords seeking to remortgage, up sharply from 29% in Q1 2015 prior to the Summer Budget in the same year when wide-ranging tax changes were announced, including the gradual removal of tax relief on buy-to-let mortgage interest.
Over the same time period, intermediaries say they have seen a drop in the proportion of mortgage applications from first time landlords, down from 19% to 13% of the total, as well as a fall in landlords remortgaging to raise funds in order to extend their portfolios. Remortgaging for portfolio expansion has fallen from 39% to 22%.
Among those landlords looking to remortgage, the proportion seeking to secure a better interest rate reached the highest level ever in Q1 2018. Compared with three years ago when equal numbers of landlords were remortgaging for a better rate and to raise captal, in Q1 2018, 60% of landlords said securing a better interest rate was their primary objective. This compares with just 30% of landlords who said raising capital was their top priority. As a result, the gap between landlords looking for a better rate and those raising capital is now at the widest seen since 2013.
John Heron, Managing Director of Mortgages at Paragon said: “There’s a wide range of factors contributing to the surge in landlords remortgaging at the moment. These include the expiry of the initial term on mortgages taken out ahead of the stamp duty changes for second properties, the expectation of rate rises on the horizon and a desire to minimise interest costs in the face of new mortgage affordabilty rules. It will be interesting to see the extent to which mortgage applications for purchases and portfolio extensions increase once these factors have played out.”