This year kicked off with many suggesting the subsequent 12 months would be the ‘year of the remortgage’ and while purchasing has clearly held its own, as we move through the current environment – with its Base Rate rises, its increased inflation, and the like – that definition appears to be solidifying.
The most recent monthly data from UK Finance shows the trend and, dare I say it, the ongoing strength of the buy-to-let market, helped substantially by remortgage activity.
Buy-to-let gross lending hit £4.9bn in May this year, up from £4.3bn the previous month, and the largest month since June 2021 when we were all still benefiting from the stamp duty holiday, very low rates and the catalyst this provided to activity levels.
BTL remortgages breaking records
It’s fair to say that buy-to-let remortgage transactions were the key driver for May’s figures, hitting £3.4bn, with purchases at £1.4bn. In all honesty, it’s somewhat rare to see remortgaging breach the £3bn monthly barrier, however this has happened twice in the last three months for which we have figures. And the total share of lending taken by buy-to-let business increased from 18.1 per cent in April to 18.8 per cent in May.
Understandably, it would seem that landlords are completely aware of the direction of travel of rates and have increasingly wanted to remortgage existing finance, which gives them stability of monthly payment over a longer period of time.
Five-year fixes have been particularly popular in recent months, and with various members of the Monetary Policy Committee talking about future Bank Base Rate increases, even though there tends to be little read-across to buy-to-let product rates, this will still be a message that makes landlords prick up their ears and take notice.
Rather interestingly, swap rates – which as you’ll know determine the level of pricing put out by wholesale-funded lenders like Foundation – have actually stabilised recently and fallen back from recent highs. It remains to be seen whether this trend continues, but from an adviser and client point of view, this might well be a time to look at what is on offer and determine whether now is the time to switch.
Incoming remortgage waves
We know there is a large tranche of buy-to-let mortgages coming up for maturity throughout almost the entirety of this year, and coupled with the catalyst provided by other economic factors, we sense this will remain a ripe market for remortgage business.
Just how long this will continue for is, quite frankly, impossible to know. Will those wider economic pressures begin to force a slowdown in activity? Certainly, tenant demand does not appear to be falling back with employment levels high, and with private rented sector supply still being constrained, rents have continued to rise.
Plus, over the last few years, house values have increased by significant amounts in a large number of UK regions. Landlords, where possible, can access increased equity in their existing properties in order to fund future deposits for more purchases, again providing they can access the limited supply available to buy.
It is very much a ‘wait and see’ approach in terms of how the economy will play out, but Foundation feels strongly that the buy-to-let market provides plenty of remortgage opportunities for advisers. If you, and your clients, can find a lender that is working to a strong service capability – we are currently at one-day levels – then you should be able to meet client demands, satisfy their finance needs, and help them continue to meet demand and build their portfolios.