Purchase business in the buy-to-let market was undoubtedly boosted by the stamp duty holiday.
Many landlords have taken advantage of the welcome reduction in upfront buying costs to expand their portfolio.
But as the tax break ends, I expect purchase business to settle back to its pre-pandemic levels. Over the last few years this has tended to be roughly 30 per cent purchase and 70 per cent remortgage.
The shift in favour of remortage business happened as a result of the second home stamp duty surcharge putting some landlords off adding to their portfolios and reducing the number of first-time investors. That hurdle will be back from October, so, while you might be busy with purchase business right now, you need one eye on the last quarter of the year and beyond.
It’s also entirely possible of course that some landlords with an eye increasing demand for privately rented property may continue to add to portfolios but be aware that it’s possible that we’ll see a shift back to remortgage business dominating buy-to-let lending again. And why not contact your existing client base now to check out their short and medium-term plans?
Your existing landlords arguably need your support more than ever. This is especially true if they’ve been financially impacted by the pandemic.
Landlords were able to take six-month mortgage breaks but, as they move back onto a payment schedule, many will still be dealing with tenants who are unable to pay. And they may still find it difficult to go down the eviction route if that is the only alternative left.
According to the National Residential Landlords Association there are an estimated 840,000 private tenants who have built up rent arrears since lockdown measures began.
Most landlords have been working with struggling tenants to help keep them in their homes, but 60 per cent have lost rental income as a result of the pandemic. Of these, 39 per cent said the losses were continuing to increase.
From a lenders perspective, we are not seeing these losses filter through in mortgage arrears so landlords are clearly being incredibly supportive of their tenants. Given the challenges they continue to face into, it’ the perfect time to get in touch for a review that could potentially stop any mortgage arrears or credit blips in other areas of their finances. A remortgage or product transfer could come at just the right time.
Luckily the number of buy-to-let mortgage deals available is at its highest level since the pandemic began impacting the UK economy last March.
There were over 2,300 deals available this March, according to Moneyfacts, but although rates have risen to a two-year high, options still remain very attractive based on historic averages. The average two-year fixed rate available up to 80 per cent loan to value (LTV) has risen from 3.56 per cent in March 2020 to 4.14 per cent this March, for example.
Access to finance is still more limited at higher LTVs, and many landlords need broker support to navigate the current market. Here’s how you can help.
Communicate: Keep in touch with your landlord clients throughout their mortgage deal. There’s no need for overkill but a quarterly ‘hello’ will keep you front of mind. It also gives you an opportunity to see if they have changes in their financial circumstances they want to discuss.
Go in early: Contact them about renewal options well in advance of end dates. Three months used to be standard, but bump that up to five. Many clients’ circumstances will have changed in the last year which could make them more tricky to place. Add in the fact that some lenders are still not back to their usual service capacity and you need to buy yourself some time.
Embrace product transfers: If they’re worried about their remortgage eligibility, your client may be tempted to take a direct product switch. It’s an easy option. But you are better placed to review their mortgages. Contact them early and explain you will source the right deal from across the market, whether from their existing lender or a new one. That’s better for them, and for you.
Share your knowledge: It’s not your place to make decisions about your client’s investment but they may appreciate your sharing your knowledge of changes they need to plan for. This could include the new EPC proposals, the Renters’ Reform Bill or the transition back to pre-Covid Right to Rent checks. Help them see what changes are coming down the line and how their portfolio could be affected.
The last 12 months have been indescribably challenging for all the wrong reasons.
But business has also been booming for many brokers, giving you little time to reflect on your strategy.
Take a step back now and consider what enquiries will look like after the stamp duty holiday ends. And start putting in the work with existing landlord clients now.