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Landlords cancel purchase plans and renegotiate mortgage terms to ease BTL pain

  • 08/05/2024
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Landlords cancel purchase plans and renegotiate mortgage terms to ease BTL pain
A quarter of landlords say they have cancelled plans to purchase an additional investment property to mitigate the rising costs of running a buy-to-let (BTL) business.

Research carried out for Foundation Home Loans revealed that, of the 774 landlords interviewed, 15% said they had sold a property to reduce their mortgage outgoings. Meanwhile, 30% said they had renegotiated the terms of their mortgage with their existing lender, while 29% said they had put up rents.

Landlords, who were allowed to give multiple responses, also said they had paid part of their monthly mortgage out of non-rental income, such as savings (15%).

To cut costs further, 17% of landlords said they now carry out more of the property management themselves, while 8% said they had switched away from letting agents to self-management. The findings are part of Foundation Home Loans’ Q1 Landlord Trends report.


Refinancing opportunities

In positive news for the sector and mortgage advisers, over four in 10 landlords said they will remortgage or opt for a product transfer this year; 49% said they had one mortgage to refinance, 24% had two, 11% had three, 7% had four, while 9% said they had over five mortgages due for refinance in the next 12 months.

Meanwhile, some 68% said they had arranged their latest mortgage using a mortgage adviser. This was higher at 72% for those with over four BTL mortgages, while 26% had arranged it direct with a lender. Just 3% had done so via an online broker or a robo-advice platform, while 1% had used a comparison website.

When asked how they intended to fund any future purchase, multiple answers were allowed, and revealed 48% said they would use a BTL mortgage. Some 38% said they would purchase it outright and 38% would release equity from existing properties, while 15% said they would use funds drawn down from a pension pot.

Foundation Home Loans said these figures showed there continued to be an opportunity for advisers to service more BTL landlord borrowers, for both purchase and remortgage activity, as it is widely accepted that closer to 85-90% of all residential mortgages are carried out via intermediaries.

When asked if they had a rate preference, a slight majority of landlords suggested a two-year fix, while close to a third said they didn’t know at this stage or would take advice closer to the time.

Grant Hendry, director of sales at Foundation Home Loans, said: “While we have seen rates come down off their 2023 highs, there will still be large numbers of landlords who are coming to the end of their current deals, and are looking for solutions in order to keep down any mortgage cost increases.

“It’s clear this presents a real opportunity for advisers in the buy-to-let space, not least because a significant minority are still opting to go direct to their lender, rather than review what is available across the entire market.

“There is a lot of maturity business coming to the table in 2024, and advice will be crucial for these landlord borrowers so they get the most positive outcome, plus a number of landlords want to add to portfolios, and there will be no stakeholder in the market who doesn’t welcome greater levels of purchase activity.”

Last month, it was revealed at Mortgage Solutions‘ Buy to Let event that first-time landlords are often going straight to house in multiple occupation (HMO) investments.

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