As we look ahead at the buy-to-let mortgage market in 2019, there are 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, including social, political and economic factors, which means predicting the level of activity in this segment of the mortgage market is very difficult without are liable crystal ball.
As the Brexit deadline gets closer, industry pundits are trying to gauge what may happen in the buy-to-let mortgage market in 2019. Certainly in 2018 there was a noticeable decrease in purchase transactions from landlords with numerous surveys and research showing a reticence among some to pursue expanding their portfolios. This didn’t signify a mass exodus from the buy-to-let property market, but more likely a cautiousness and ‘let’s wait and see’ attitude while watching how the government’s negotiations play out.
However, 2018 did see a healthy buy-to-let remortgage market and a greater proportion of landlords choosing fixed rate mortgages during this period of complex discussions in Brussels. Certainly there is the possibility that Brexit could unsettle the UK economy and the prospect of a rise in interest rates is realistic, leading to more investors looking to fix their monthly mortgage payments.
For this reason, it could be beneficial for landlords to examine their current portfolios this year and make the most of some very attractive deals being offered. There is no shortage of lender and product options as providers of buy-to-let finance still seem very keen for business. There are also plenty of remortgage products that come with incentives such as a free valuation or free legal fees.
The buy-to-let remortgage market could be a profitable place for brokers to focus on this year and keep a close eye on clients whose initial rates are coming to an end.
Following the theme of remortgaging, it may not always be in a client’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 PRA regulations that came into force in 2017, that have had a significant effect on the underwriting approach from buy-to-let lenders. This has included more stringent rent stress tests and stricter underwriting for portfolio landlords which 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 offering attractive rates and this could be a good source of income for intermediaries. Although procuration fees are normally lower for this type of transaction, the work involved in completing these cases is significantly less.
With the PRA regulations resulting in such significant changes to buy-to-let underwriting there have been more cases of legitimate applicants falling short of the current rental stress tests despite being able to afford monthly payments on their mortgages. For this reason, we have seen more lenders offering a ‘top slicing’ or ‘rental top up’ facility to their buy-to-let propositions to support viable applicants who may have a shortfall of rent for the given rent stress test, but have provable surplus income that verifies their suitability for finance. TBMC has a good selection of lenders on its panel to help with this scenario and is well placed to help intermediaries place tricky cases in the buy-to-let mortgage market.