Landlords have been urged to speak with specialist buy to let mortgage broker firms over the coming weeks, as many consider remortgaging options at the end of the initial fixed period.
April 2016 saw the introduction of the Government’s 3% stamp duty levy on second homes, prompting many borrowers to rush through buy to let mortgage applications to beat the deadline and avoid incurring additional costs.
According to the Council of Mortgage Lenders, now UK Finance, in March 2016 landlords borrowed £7.1 billion, an 87% month-on-month increase and a 163% year-on-year rise.
This activity accounted for 45,000 loans in total, an 88% increase on the previous month and 142% more than for March 2015.
In a press release in May 2016, Paul Smee, the then director general of the CML, commented:
“Activity was distorted in March due to a rush to beat the introduction of changes to stamp duty on second properties in April, alongside the seasonal uptick in activity before Easter. While the increases are substantial, these supercharged levels of activity are likely to be temporary and will fall back over the summer months.”
Many of those deals were completed on two-year terms – and with interest rates still currently low, astute landlords will be investigating their remortgage options, rather than have their monthly payments revert to a higher standard variable rate.
Andrew Turner, chief executive at Commercial Trust Limited, discusses the vital role a buy to let specialist has to play in finding an appropriate remortgage deal.
“Undoubtedly there was a mad rush in March 2016 to complete deals ahead of the stamp duty deadline. At Commercial Trust we saw 134% year on year growth in applications.
“Now, more than ever, it is vital for landlord investors to use the insights of a specialist broker to set themselves up for success.
“All too often the temptation is to stick with your previous lender, or go to your personal bank. This is a very narrow picture of your options and may very well not result in the most appropriate product for your needs, or the most competitive option.
“Furthermore, the lending environment has changed radically since April 2016. The introduction of new Prudential Regulation Authority rules in 2017 has resulted in much stricter underwriting from a large proportion of mortgage lenders, both for individual investors and especially portfolio landlords.
“A specialist broker firm will be working with lenders from across the marketplace day in, day out and can recommend a product that meets your current and overarching investment objectives.
“With their inside knowledge, a specialist broker can also head off potential obstacles that are an upshot of the new lending environment, potentially saving the borrower both time and money.
“Many smaller brokers themselves are finding the diversity within the buy to let space beyond their capacity to monitor; it takes significant resource to do so.
“Because of the time it can take to complete a deal, I would recommend starting the process as soon as possible by getting in touch with a professional you know you can trust and it is no accident that we are so-named.”
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Daniel Peacock