During a panel session, Louisa Ritchie, key account manager at Fleet Mortgages, and James Forth, head of sales at Kent Reliance and Precise Mortgages, said the buy-to-let (BTL) market was performing better than last year as lower rates, product choice and improved yields spurred landlords on.
However, one delegate said as a broker, they were still seeing landlords struggle to refinance onto a higher rate as it reduced their cash flow.
Forth agreed and said some landlords would be faced with “serious cash flow restrictions” and possible “negative equity”.
He said professional landlords could seek tax advice and consider borrowing through a limited company, as some were “slow to switch on with what was happening” and were seeing the downsides to borrowing in their personal name.
Ritchie said another challenge was that because many lenders in the BTL sector were non-bank-funded, “they’ve not been able to offer a product transfer proposition”. She said this was changing and there was more innovation, but it was “quite difficult”.
“There’s restrictions on it. It’s not because lenders don’t want to, we do to help you and your landlord clients. But we are getting there, we are trying as lenders to help landlord clients going forward, so I think we’ll see more and more innovation around that,” Ritchie added.
She also said there were a number of high-fee products in the market last year but, now that rates were starting to settle, “you’ll probably see that type of thing go”.
Ritchie added: “Fewer are the days where you’ll see lenders with fees of 7% or 8%.
“Going forward, you’re going to see a lot of lenders pulling out of the high-fee market now that rates are settling a bit.”
Considering the impact of rates on yield returns
During a later presentation, Ian Hall, regional account manager for the North at Landbay, made a similar suggestion regarding landlords seeking tax advice.
Speaking about yields and how higher mortgage rates could reduce this, he said: “You’ve got to remind the landlord that they can cope with it now, but what about when they’re doing their tax return for this year? They need to look at their portfolio to make sure they can afford to pay their tax return.”
Hall also said brokers should make themselves aware of average yields and look at the data to get familiar with the locations their landlord clients operated in.
If you are interested in learning more about the BTL sector, the Buy to Let Event is still taking place next week in Cardiff on 1 May and Reading on 2 May; register here to attend.
