01 January 2023

Why 2023 is another bumper year for remortgages and product transfers?

By Keystone Property Finance

Even the most ardent of optimists couldn’t deny that 2022 has been a challenging year for the buy-to-let market.

More than a decade of record-low interest rates and relative stability has been replaced by uncertainty and, for a brief period, a touch of chaos.

However, 2022 has not been all doom and gloom and, arguably, current conditions create even greater demand for good advice, which is never a bad thing.

And while the outlook for the market doesn’t look quite as rosy as it once was, I believe there are real opportunities for both brokers and lenders throughout 2023.

Remortgage boom continues

One of the key features of the buy-to-let market in 2022 was the boom we have seen in remortgage business.

If you look at the data from UK Finance, the first eight months of 2022 were a record for buy-to-let remortgage lending, with lenders advancing more than £24.6 billion.

At the start of 2022, the trade body predicted £27 billion of buy-to-let remortgage lending for the year, meaning the market has surpassed expectations so far.

The obvious question, then, is: why, and will this trend continue into 2023?

To tackle the first part of that question, we need to go back to 2016, when the Bank of England introduced more robust underwriting rules for portfolio landlords.

Without going into the finer details, it meant lenders had to implement stricter affordability checks on landlords with four or more properties fixing for less than five years. Ultimately, this led to smaller loan sizes for many borrowers.

Crucially, however, the Bank of England introduced a solution for landlords fixing for five years or more, meaning they would be subject to affordability checks based against the pay rate of the product.

As you’ve probably already guessed, this led to a significant increase in the number of landlords opting for longer-term fixed rates.

UK Finance data shows just one in 10 landlords chose a five-year fixed rate in 2013/14. However, by the end of 2017 – shortly after the rules were introduced – it was more like one in three. These days, it is likely to be much higher again.

Those five-year fixed rate deals taken out in 2016 and 2017 are now maturing, which is why we have seen such a leap in remortgage activity.

And in answer to the second part of the question I posed earlier, yes, the remortgage boom is set to continue throughout 2023.

In fact, UK Finance predicts a further £33 billion of remortgage lending next year, which may end up being even more than this year.

Don’t forget about product transfers

However, while most of the market has been talking up the remortgage opportunity in 2022/23, product transfers (PT) have been conspicuously absent from the conversation, especially in the complex BTL market. 

Naturally, whether a remortgage or a PT is more appropriate is down entirely to individual circumstances.

While remortgaging to another lender can secure a better rate, it can be expensive. Once you factor in lender, valuation and legal fees, the total cost can run into thousands of pounds.

On the other hand, one of the major selling points of a Product Transfer is that often they come with either substantially reduced fees or none whatsoever. This can make a huge difference to the overall cost of a loan.

Why use Keystone

  • Remortgages within 6 months – available for individuals and complex corporate structures.
  • Product Transfer facility with no application, valuation, or legal fees.

To find out more about our remortgages and product transfer facility as well as our buy to let product offering visit www.keystonepropertyfinance.co.uk.

Alternatively, get in touch with our BDM team by emailing enquiry@keystonepropertyfinance.co.uk , call the broker hotline (0345 148 9086) or via the online chat facility here.

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.