Professional landlords sense opportunity and require certainty
By Steve Cox, Chief Commercial Officer at Fleet Mortgages
Buy-to-let activity in 2022 has kicked off strongly, which is particularly positive given the very strong transaction numbers – particularly purchase – that we saw over the course of last year.
While 2022 might not see that level of purchasing – which was in part fuelled by landlords being able to access the stamp duty holiday – there is still likely to be a significant number of landlords seeking to add to portfolios, and more than likely utilising the equity they have gained via house value increases, to do so.
At Fleet we’ve seen a noticeable rise in remortgage business, as landlords seek to take advantage of a private rental sector currently witnessing increasing tenant demand, growing rents and yield, and the potential for long-term capital growth.
As advisers will be acutely aware of, the changes to stamp duty and mortgage interest tax relief, continue to reshape our market, meaning greater use of limited company vehicles to purchase rental properties, bigger numbers of portfolio landlords, and a professional’s desire to treat this as a business and to keep adding in order to meet demand.
When we launched, we recognised this was likely to be the way the market was heading and have tailored our proposition to supporting portfolio and professional landlords, and those who would want to be the next generation.
It’s why we offer a specific limited company/LLP product range and why we continue to provide products for those seeking to purchase or remortgage HMOs or multi-unit blocks, which tend to be more sought after by the professional landlord community.
We also feel it’s important to acknowledge the shifting mortgage needs of these types of borrowers, especially in an environment where, for example, upfront costs are so important to overall profitability, and where borrowers are not just seeking the most competitive rates but also a lender that fully understands the sector, and have the highest standards of service which are deemed most important to advisers and these clients.
Of course, landlord borrowers – like those in the residential space – will also be keeping a keen eye on mortgage costs, especially in an interest rate environment which looks to be shifting out of the ultra-low range we have all seen over the past decade.
No-one can predict the future, and Bank Base Rate (BBR) is not necessarily a pre-cursor of buy-to-let product rates, but the markets are pricing in a movement of BBR up to 2% by the end of next year, and swap rates have now moved off their former low levels.
Advisers will be acutely aware of this, and the want and need of certain landlord clients to lock in those mortgage costs over a much longer-term than they might previously have been interested in.
To this end, we recently launched a range of seven-year fixed-rates designed to smooth out any potential for price fluctuations over that period, and give those landlord borrowers who require, it, long-term monthly mortgage payment security. The rates for both standard and limited company/LLP options start at 3.29%, while for HMO/MUFB they are priced at 3.59% and there are valuation incentives for those that quality.
In recent years we’ve seen a growing popularity amongst landlord borrowers for five-year fixes, with a focus on maximising loan amounts on top of a penchant for payment certainty. These seven-year fixed-rate deals take this up a notch, at a time when no-one can be quite sure of where interest-rates go next, but with an acceptance that the Bank of England, for example, is likely to feel the need to act (and increase BBR) much more consistently in order to try and meet its inflation target.
Fleet will continue to keep a watchful eye on this and will seek to provide both flexibility and certainty to landlord borrowers through our products, rates, incentives and service offering as they seek to refinance and continue to add to portfolios.
For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.