Even with more tax changes there is plenty of BTL business for brokers – L&G Mortgage Club

by: Danny Belton, head of lender relationships at Legal & General Mortgage Club
  • 23/04/2019
  • 0
Even with more tax changes there is plenty of BTL business for brokers – L&G Mortgage Club
Although there has been a slowdown for buy-to-let, there is still plenty happening in the market - particularly outside the traditional areas that landlords focused on in the past.


So how is the market currently faring and what are both lenders and brokers seeing?

I spoke with Liz Syms, CEO at Connect Mortgages, and Grant Hendry, head of national accounts at Foundation Home Loans, for their views. We agreed there is plenty to be positive about.


No mass departure

The big changes over the last few years have not been nearly as bad as many predicted, but both landlords and lenders have faced a steep learning curve.

Many commentators initially expected dinner party landlords to exit the market and sell, rather than face increased tax costs or stricter regulation.

However, the true number of those selling-up has been far lower than predicted.

Tax changes have made many landlords think about their portfolio management – and the larger ones are thriving.

While there are tighter margins, it has highlighted two main landlord groups – prepared and unprepared.

Those that are prepared have already future-proofed their business. Setting up a limited company structure has kept their business models viable, for example, while sound financial advice has helped them avoid shedding any huge assets or losses.


Remortgaging remains high

Remortgaging and fixed rate products still account for the lion’s share of lending.

Fixed terms keep costs down and provide certainty of payments during a time of economic uncertainty.

That is why demand for five- and ten-year fixed rates is increasing.

With rates still at near record lows and these products proving very popular, landlords are likely to remain in this market.


Short-term lets

A weak pound combined with an influx of expats and international buyers is also driving demand for holiday buy-to-let.

A professional holiday let run correctly will be treated as a business by HM Revenue and Customs, but landlords can off-set their mortgage interest against their rental income – even if the property is in their own name.

Airbnb adds another factor to the holiday let equation, with many lenders now offering short-term let products in response.

It’s a lucrative opportunity and affordability can work in a very similar way to holiday lets.


The Northern powerhouse

Smaller returns in London and the South East mean that landlords are now looking elsewhere for new opportunities.

The North is attractive not just for higher yields, but good value for money too.

It’s a buyer’s market and savvy landlords with liquid capital can snap up a good deal quickly.

Student cities like Manchester, Sheffield, and Leeds are where many are focusing.

With strong demand for high quality student accommodation and houses of multiple occupation (HMOs), landlords can make the most of secure long-term returns here and maintain profit levels.


What next?

Ultimately, buy to let is here to stay.

Some renters may be unable to buy and for others, renting is a lifestyle choice – so the private rental sector will continue to be an important part of Britain’s housing market.

Even with the potential for further tax changes, there is plenty of business here for brokers.

Advisers should get in touch with clients to review their assets and assess their long-term profitability.

This will enable them to future-proof their client’s portfolio and also help to mitigate any upcoming changes.

There are now more buy-to-let products and criteria ranges than before the credit crunch.

As such, brokers are more important than ever for landlords and they can support this vital part of the market through this next transition phase.



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