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Buy-to-let brokers to turn attention to five-year remortgage business

Buy-to-let mortgage brokers will switch their attention to the remortgage of five-year deals written in 2016 after the Stamp Duty holiday ends at the end of March, Paragon Bank research has found.

Half of brokers that deal in buy-to-let (50%) said that they will focus on five-year remortgage business when the Stamp Duty holiday ends.

The number of five-year fixed rate buy-to-let mortgages increased significantly in the run-up to the introduction of the buy-to-let Stamp Duty surcharge in April 2016. Industry data shows that the number of five-year fixed buy-to-let completed in the six months to the end of March 2016 was 121% higher than the same period in 2015.

The introduction of new buy-to-let underwriting rules in 2017 provided further stimulus to the five-year fixed market, with this length of deal continuing to grow in popularity since.

Moray Hulme, Paragon Director for Mortgage Sales, said: “There was a significant increase in five-year fixed rate business written in the run-up to the introduction of a 3% buy-to-let Stamp Duty surcharge in April 2016 and those deals are due to expire in the coming months.

“Brokers are extremely busy getting deals over the line ahead of the end of the Stamp Duty holiday, but the prospect of remortgage business will give them some hope that they won’t face a complete cliff edge of business as we head into April.”

Other areas of focus identified by brokers included concentrating on clients’ needs for short-term finance and diversifying into holiday lets, selected by 16% and 13% of brokers respectively. Meanwhile, four in 10 brokers said they had no plans to cope with a decline in business once the Stamp Duty holiday ends.

Paragon’s survey of over 200 intermediaries found that nearly six in ten think that case volumes will be negatively affected after the Stamp Duty break ends. The majority of brokers, 47%, opted for the most negative forecast, expecting business to ‘significantly decrease’, with ‘slightly decrease’ the outlook for 12% of respondents, making it the next most popular choice.

Conversely, just over one in ten expect case volumes to actually increase in quarter two of 2021, 9% think slightly and 2% significantly.

Moray Hulme added: “The Stamp Duty break has provided welcome stimulus to business and has helped the buy-to-let market bounce back. Once the scheme ends we expect the landscape to be quite different when compared to the one we have seen over the past few months, with many expecting cases to reduce significantly.

“While we recognise that this does result in some uncertainty for the industry, we should be reassured when we remember how mortgage application numbers recovered after taking a dip in 2016 when new rules meant landlords were required to pay an additional 3% Stamp Duty on property purchased to rent over and above standard rates.”

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551