Maximising the BTL remortgage opportunity
By Steve Cox is Chief Commercial Officer at Fleet Mortgages
We are now well into the Spring, and this is traditionally a very important time for the housing market particularly when it comes to heightened purchase demand and activity.
However, at the same time, I think we all recognise how important the remortgage market is for advisers and their clients right now, particularly (as we know) when 2023 is a very different mortgage market to 2021/2018, etc, when clients may have picked up their last mortgage.
Of course, any remortgaging opportunity now has to be seen within the context of what is likely to come over the horizon in terms of EPC minimum levels, and how existing landlords are going to fund any works required if their property is a D or below.
At the time of writing, the rumour mill was cranking into overdrive when it comes to EPC minimum levels. For the past couple of years, we’ve all been working on the assumption that any new tenancies would only be allowed in properties with an EPC Level C or above from 2025, and existing tenancies would have until 2028 to reach this.
However, according to a story in The Telegraph at the end of March, this dual track approach is now likely to be scrapped and instead all landlords will now have until 2028 to ensure their property has reached the minimum level.
That perhaps provides a greater degree of simplicity to the process, and certainly gives those landlords who do own properties below the EPC level a little extra time in order to literally get their ‘houses in order’.
Yet, and here is definitely something for advisers to be pointing out to landlords remortgaging in 2023, if they are opting for a five-year product it means – by the time they come to remortgage again – it will already be 2028 and they will have needed to ensure their property is at Level C.
If they are planning to utilise their mortgage to fund any improvements required then, given the limited option to secure a further advance from many buy-to-let mortgages, this 2023 remortgage will need to be the one in which they secure the funds needed for the work.
So, while five years does seem like a long time in the future, we have to bear in mind what tends to be the most popular product choice, with regards to term – five years – and to help borrowers understand how that is going to impact on their plans for their property and how they will meet the new standards.
Bearing in mind, of course, that these measures are still just rumours and have not hit the statute book yet, but the likelihood is they will at some point. Plus, something else to bear in mind, is that there is likely to be a General Election next year, and if we have a change in Government, the timetable might be shortened and/or the measures might become more stringent.
In other words, the time to act is the sooner the better, because landlords can future-proof their property investment, and perhaps give themselves some breathing space should they also need to act again in the future.
From our perspective, and again to highlight where the market currently sits, we have seen a significant interest in five-year fixed-rate product deals in the past few weeks, most notably in terms of our 70% LTV deal which does come with a lower rate and a higher fee, which we know is helping a lot of landlords meet the affordability criteria required with a higher rate environment.
Again, to reiterate, any landlord borrower coming to the end of their mortgage deal during the rest of 2023 is likely to be seeing a significant difference in terms of the rate they are currently on, and the rate they are able to secure.
Even with – hopefully – increased equity within the property and having benefited from again – hopefully – an increase in rental yield over the course of their last mortgage, there is likely to be a significant rate difference, and therefore advisers need to ensure borrowers are aware of what is available, as well as the options for those who will need to improve their EPC levels.
Of course, this is exactly what advisers are there to do, and it’s why we have specialist mortgage lenders like ourselves, who fully understand the market as it is today, and what we can bring in terms of our knowledge and expertise.
Working with advisers to find the right solutions for those borrowers who might be struggling with affordability currently is undoubtedly a core part of our offering right now, and this is likely to be the case for the foreseeable future.
Contact our Team to find out more:
01252 916 800
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