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Buy-to-let remortgage activity set to fall

With some landlords finding it harder to make a profit as a result of changes to buy-to-let taxation, remortgage activity looks set to fall moving forward as investors seek to mitigate higher tax costs, Paragon’s PRS Trends Report for Q1 2019 shows.

Paragon’s latest quarterly survey, which tracks the experience of more than 200 landlords with an average of 12.8 properties and more than 20 years’ experience in the UK’s PRS, shows that while landlords in this group remain engaged in the sector, they are now prioritising measures to bolster financial strength rather than add to their portfolio.

It would appear, based on this research, that landlords are increasingly scaling back their buying intentions, reducing their reliance on mortgage debt and improved affordability by spending less of their rental income on mortgage payments.


For example, the proportion of landlords looking to purchase property has fallen from between 15-20% before the announcement of tax and regulatory changes in 2015 to just 7-10% today.

Average portfolio gearing, which measures the proportion of debt finance relative to a portfolio’s overall value, has dropped from 40% in 2014 to 33% today, with landlords who have three or more properties borrowing 36% of their portfolio value on average.

Meanwhile mortgage costs as a proportion of rental income are down from 30% at the start of 2017 to 27%, also aided by landlords re-mortgaging onto lower interest rate and longer-term fixed mortgage deals.

John Heron, director of mortgages at Paragon, said: “The shift in focus from portfolio expansion to financial strength has driven a surge in buy-to-let remortgaging, with lower interest rates and longer initial fixed periods helping landlords reduce finance costs and lock in greater certainty.

“However, it also extends the product maturity cycle, guaranteeing a reduction in the scale of opportunity to refinance buy-to-let mortgage deals over the next few years.”

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Poll: Are you scaling back your property buying intentions?


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    • 10 April 2019 10:55 AM

    Hardly a surprise that LL are scaling back and consolidating.
    S24 being the main cause.
    It now makes sound economic sense to go for long term remortgage deals.
    Lenders and mortgage brokers will have to forget all that lovely churn income they used to get based on their daft 2 year deals.
    But from a lender perspective far better to retain market share by locking in a LL bum on a seat for a long term period.
    10 years being optimum from a lender perspective.
    What would be useful in light of the S24 issue is for many more lenders to offer the BTL offset mortgage with LTV max of say 75%.
    This will encourage LL to deposit their liquid cash in offset savings accounts as S24 is substantially mitigated.
    This will be useful for lenders who would see how financially robust some LL are and would give them greater confidence in their balance sheet.
    Many LL have substantial liquid assets which would be best used in an offset BTL product so largely mitigating S24 effects.
    Lenders need to revisit the offset BTL mortgage product.
    I believe there are ONLY 3 BTL lenders that offer the offset product but restrict to 50% LTV which isn't much use for most LL.
    By offering really effective offset BTL mortgages the lenders could substantially reduce the damaging effects of S24


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