Landlords raising capital to fund portfolio expansion are driving the growth in buy-to-let remortgaging.
According to the Council of Mortgage Lenders, remortgaging accounted for over two-thirds of the 21% increase in buy-to-let advances between the first and second quarters of this year.
A survey of mortgage brokers by specialist lender Paragon shows that prime reason for landlords remortgaging is to raise capital for further purchases.
On average, nearly half (47%) of buy-to-let remortgages handled by intermediaries surveyed were for the purpose of raising capital, while three out of ten (35%) were to achieve a better rate of interest.
Other reasons for remortgaging included landlords’ existing lenders actively encouraging remortgaging (8%) and dissatisfaction with an existing lender (7%).
Remortgaging hit its highest level since the final quarter of 2008 during the second quarter, according to the CML’s figures. The £1.86bn advanced for remortgage purposes represented 53% of the total £3.5bn buy-to-let lending for the period.
John Heron, Paragon Mortgages’ managing director, said: “Approximately two-thirds of properties in the private rented sector have no mortgage, while the average loan-to-value on those properties with a mortgage is 48%, so there is a huge amount of equity in the sector that landlords are looking to utilise to help fund portfolio growth.
“CML figures show there was a significant increase in buy-to-let remortgage cases between the first and second quarters of this year, and it appears a large proportion of that is from landlords releasing equity to generate seed capital for portfolio expansion.
“In a market characterised by high rental demand, we could see this becoming more commonplace.”
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