"This presents a real opportunity for advisers in the buy-to-let space, not least because a significant minority are still opting to go direct to their lender"
- Grant Hendry, director of sales at Foundation Home Loans
A significant number of buy-to-let landlords have made financial changes over the last 18 months in order to mitigate the rising costs of running a rental property, including renegotiating mortgage finance, increasing rent or selling property, according to new research from Foundation Home Loans.
Multiple responses were allowed, with 30% saying they had renegotiated their mortgage with their existing lender, 29% increasing rents, 25% cancelling plans to purchase additional property, 22% remortgaging to another lender, 15% paying part of their monthly mortgage payment out of non-rental income like savings, and 15% selling a property to reduce their mortgage outgoings.
17% of landlords said they now carry out more of the property management themselves in order to cut costs, while 8% said they had switched away from letting agents to self-management.
The research, comprised of 774 online interviews with landlords, was undertaken between March and April this year.
Over four in 10 landlords said they will remortgage or opt for a product transfer this year; 49% said they had one mortgage to refinance, 24% had two, 11% had three, 7% had four, while 9% said they had over five mortgages due for refinance in the next 12 months.
When asked how they had arranged their most recent buy-to-let mortgage, 68% said they had done so via a mortgage adviser – this was higher, at 72%, for those with over four buy-to-let mortgages – while 26% had arranged it direct with a lender, 3% had done so via an online broker or a robo-advice platform, while 1% had used a comparison website.
When asked how they intended to fund any future purchase, 48% said they would use a buy-to-let mortgage, 38% said they would purchase it outright, 38% would release equity from existing properties, while 15% said they would use funds drawn down from a pension pot.
Foundation said these figures showed there continued to be an opportunity for advisers to service more buy-to-let landlord borrowers, for both purchase and remortgage activity, as closer to 85/90% of all residential mortgages are carried out via intermediaries.
When asked if they had a rate preference, a slight majority of landlords suggested a two-year fix, while close to a third said they didn’t know at this stage or would take advice closer to the time.
Grant Hendry, director of sales at Foundation Home Loans, said: “Understandably, landlords have been using all options at their disposal when it comes to mitigating the increase in mortgage costs they have seen as a result of higher rates, and there is clearly a ‘needs must’ approach to dealing with this issue.
"As well as remortgaging to a new lender for a better rate, or renegotiating with their existing lender (taking a product transfer), a great many are funding increases via savings or selling properties so they don’t have to increase rents.
“While we have seen rates come down off their 2023 highs, there will still be large numbers of landlords who are coming to the end of their current deals, and are looking for solutions in order to keep down any mortgage-cost increases.
“It’s clear this presents a real opportunity for advisers in the buy-to-let space, not least because a significant minority are still opting to go direct to their lender, rather than review what is available across the entire market. Plus, a number feel they are getting ‘advice’ in doing this, which may support their understanding of the rate type, but does not open them to what’s available from other lenders.
“Of course, the PT offer might well be the most suitable for the landlord at that time, but there are clear benefits in taking advice from a professional, independent adviser, especially given this is a competitive market and there may be other more suitable, cheaper product options available to them.
“As noted in the survey, there is a lot of maturity business coming to the table in 2024 and advice will be crucial for these landlord borrowers so they get the most positive outcome, plus a number of landlords want to add to portfolios, and there will be no stakeholder in the market who doesn’t welcome greater levels of purchase activity.
“It clearly remains challenging times for landlords but they are maintaining the profitability of their portfolios, yields continue to rise, plus there remains strong tenant demand against a backdrop of relatively low supply and higher population numbers seeking housing.
“Advisers can clearly play a vital and pivotal role for them, and our survey numbers suggest there are still a significant number of landlords who are not using the services of an adviser, and therefore missing out on a raft of product options, not forgetting the protection that comes with advice.”
