We know that, in the mainstream space, PTs account for a significant amount of business, but is that truly replicated in the BTL market where the extent of PT activity is not really known?
Looking at the latest predictions for 2022 and 2023 from UK Finance, while it suggests PT lending figures will grow significantly over the next couple of years, it doesn’t break that figure down between homeowners and BTL borrowers.
My expectation is that PTs will run with the trend, however I’m also aware that given landlord borrowers’ wants and needs, particularly around capital-raising, a lot of that potential PT business might actually find a home in the remortgage space.
Let’s be clear, we know that a lot of BTL business will mature in 2022, as a result of the significant number of five-year deals that were taken out at the end of 2016/through early 2017, just prior to the Prudential Regulatory Authority (PRA) introducing its enhanced mortgage stress tests.
It was a means to an end for many landlord borrowers back then, which necessitated a five-year fixed rate deal.
Five years on, I think we’re all acutely aware of just how much the housing market landscape has changed. Not least the fact landlords who have held onto those properties for the full five years are likely to be sitting on increased equity fuelled by house price increases.
Despite a lot of media chatter about existing landlords selling up, put off allegedly by the costs of having to bring properties up to an EPC level of E, and then C, in a few years time, I just don’t buy this argument, especially when they might have seen capital increases of 10 per cent or more in the last year alone.
And when you add in all the other demographic and demand drivers that make property still a compelling investment.
Landlords’ ambitions should not be ‘underestimated’
Towards the tail-end of last year, we saw remortgage activity beginning to increase, and as we know when professional and portfolio landlords remortgage they tend to be doing it in order to access the existing equity, and to gear up in order to fund future purchases.
The likelihood is that we won’t see the purchase activity levels of last year – for obvious stamp duty-related reasons – but we also shouldn’t underestimate landlords’ ambitions in this market and their understanding of tenant demand, property supply shortages, and the fact that property remains a good home for their investment money.
Of course, landlords are faced with regulatory and political changes, as well as having to adapt to taxation shifts and the like, but this is all factored into the profitability of their properties and what they want to achieve with their portfolios.
In that regard, an acquisitive landlord is going to be seeking a capital-raising remortgage, and the good news is they have a highly-competitive product space to choose from, with keen pricing and lenders like Fleet who specialise in this space and want to help advisers’ landlord clients to secure the finance they need to expand their portfolios.
PT business will be there, but certainly for those who are coming off five-year deals, a full review of the entire market for remortgaging is likely to bring up any number of excellently-priced options, which allow them to secure the money they need to expand.
That is good news for them, and it is certainly good news for the advisers that service them.
