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Buy-to-let retention tipped to soar as landlords grapple with changed affordability rules

  • 19/02/2018
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Buy-to-let retention tipped to soar as landlords grapple with changed affordability rules
Buy-to-let product switching could soar this year, as borrowers struggle to meet tougher affordability measures and a tranche of deals reach maturity, brokers have suggested.



Stricter buy-to-let rules covering interest coverage ratios (ICR) were introduced by the Bank of England’s Prudential Regulation Authority (PRA) for lenders at the start of 2017.

It has meant that some borrowers may now find they don’t meet the new standards and will find it easier to stay with their existing lender rather than try to get a new deal with a new lender.

Daniel White, managing director at White Financial Services, has seen a recent uplift in buy-to-let remortgage business.

He said: “The rates I’ve had for expiry have also remained with the current lender and I’ve switched the rate, mainly because it’s just as cost effective but also because some clients don’t meet new criteria.

“I would expect to see lenders’ retention on buy-to-let business quite high this year.”

Andrew Montlake, director at broker Coreco, said: “We will undoubtedly see a spike in buy-to-let product transfers this year, as borrowers struggle with the new regime and affordability calculations that would ordinarily have allowed them the freedom to remortgage to a new lender and obtain the very best rates.

“This will be more pronounced as we pass the two year anniversary of the stamp duty surcharge.”

Daniel Bailey from broker Middleton Finance said the rule changes are pushing borrowers into longer fixes.

He said: “I have seen more clients looking to fix for five years.

“A two-year fix deal soon comes around and you are looking at potentially more fees and paperwork.

“Some lenders’ affordability calculations are more generous if the client decides on a five-year fix.”


Increase in buy-to-let activity expected

It comes ahead of an expected surge in buy-to-let remortgage activity, as the two-year anniversary of the stamp duty surcharge, introduced in April 2016, approaches.

Many people rushed to buy investment properties in February and March before the added levy took effect and these deals will not be reaching maturity.

And lenders are fighting hard for business coming to market with new attractive deals.

Nationwide’s buy-to-let arm TMW last week launched the lowest ever five-year fixed-rate for buy-to-let at just 1.99% at 50% loan to value (LTV), while also cutting rates.

And Skipton Building Society has today launched a fee-free five-year buy-to-let remortgage with a rate of 2.89% at 75% LTV.

The threat of higher rates in the coming months is also creating business, according to Sebastian Riemann from Libra Financial Planning.

He said: “Activity in general seems high which could be due to a few different things, such as rates on offer increasing, more talk of Base Rate rises and generally a greater focus on remortgages of late.”

It’s feared, however, that some lenders could be struggling to cope with the uplift in activity.

One broker told Mortgage Solutions: “I am noticing that with some lenders they are taking several days for a case to get to underwriters where it used to be 24 hours and instead of 48 hours to review valuations, I am being quoted five working days.

“Either they are swamped with work and/or they have cut back on staff.”

Other advisers also noted delays of around 10 days for looking at documents from some lenders.

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