Tuesday 03 Apr 2018
It is estimated that around £13 billion of existing buy-to-let (BTL) mortgages are set to finish their tie-in periods in the first half of 2018, and that means landlords need to move quickly before mooted interest rate rises are announced.
At the start of 2016, the BTL market witnessed an almost unprecedented volume of completions as landlords sought to bolster their portfolios ahead of new stamp duty rules.
Add into the mix low fixed interest rates and straightforward lending criteria, and it really was a golden period.
But that was then, this is now.
Following the two major changes by the PRA (Prudential Regulation Authority) in 2017, many landlords may be unable to meet tougher stress test rules when refinancing, especially as lenders now look at the whole portfolio when considering applications, rather than just the subject property.
Compounding matters further still is the closure of the Funding for Lending Scheme, which will put upward pressure on interest rates.
But that doesn’t mean landlords should drift onto higher standard variable rates or ignore the problem and hope it will go away, because the industry has adapted too.
Many lenders have had time to understand and implement the changes, improving their workflow processes in accordance, but still the entire process from application to completion will take longer than it used to.
In addition, there are still excellent rates to be found, but here is a word of caution: murmurings from the Bank of England indicate that interest rates may rise again soon, and naturally this will be reflected in the products available to landlords. Given both of these particulars, time is definitely of the essence.
The simple advice is to act now and begin assessing your current BTL mortgage needs.
Once current requirements have been considered and a plan of action formulated, brokers and specialist finance companies will be able to point you in the right direction to make the process as seamless and short as possible.
This very much represents the next big buy-to-let challenge for landlords, but with the right advice and planning it should be seen as an opportunity and not a further hindrance.