As we look ahead at the buy-to-let mortgage market in 2019, thereare some known trends and veritable uncertainties as to how the marketplace,economy and general activities of landlords will develop.
The buy-to-let sector is subject to numerous influences, includingsocial, political and economic factors, which means predicting the level ofactivity in this segment of the mortgage market is very difficult without areliable crystal ball.
As the Brexit deadline gets closer, industry pundits are trying togauge what may happen in the buy-to-let mortgage market in 2019. Certainly in2018 there was a noticeable decrease in purchase transactions from landlordswith numerous surveys and research showing a reticence among some to pursueexpanding their portfolios. This didn’t signify a mass exodus from thebuy-to-let property market, but more likely a cautiousness and ‘let’s wait andsee’ attitude while watching how the government’s negotiations play out.
However, 2018 did see a healthy buy-to-let remortgage market and agreater proportion of landlords choosing fixed rate mortgages during thisperiod of complex discussions in Brussels. Certainly there is the possibilitythat Brexit could unsettle the UK economy and the prospect of a rise ininterest rates is realistic, leading to more investors looking to fix theirmonthly mortgage payments.
For this reason, it could be beneficial for landlords to examinetheir current portfolios this year and make the most of some very attractivedeals being offered. There is no shortage of lender and product options asproviders of buy-to-let finance still seem very keen for business. There arealso plenty of remortgage products that come with incentives such as a freevaluation or free legal fees.
The buy-to-let remortgage market could be a profitable place forbrokers to focus on this year and keep a close eye on clients whose initialrates are coming to an end.
Following the theme of remortgaging, it may not always be in aclient’s best interest to seek a different lender for their refinance options.There have been so many changes over the last couple of years, namely the PRAregulations that came into force in 2017, that have had a significant effect onthe underwriting approach from buy-to-let lenders. This has included morestringent rent stress tests and stricter underwriting for portfolio landlordswhich may limit the options for some professional landlords seeking to refinance.
Despite this, there is a growing number of lenders offering‘switch’ or ‘retention’ products to existing customers with many offeringattractive rates and this could be a good source of income for intermediaries. Althoughprocuration fees are normally lower for this type of transaction, the workinvolved in completing these cases is significantly less.
With the PRA regulations resulting in such significant changes tobuy-to-let underwriting there have been more cases of legitimate applicantsfalling short of the current rental stress tests despite being able to affordmonthly payments on their mortgages. For this reason, we have seen more lendersoffering a ‘top slicing’ or ‘rental top up’ facility to their buy-to-letpropositions to support viable applicants who may have a shortfall of rent forthe given rent stress test, but have provable surplus income that verifiestheir suitability for finance. TBMC has a good selection of lenders on itspanel to help with this scenario and is well placed to help intermediariesplace tricky cases in the buy-to-let mortgage market.