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Landlord remortgaging reaches all-time high

  • Landlord remortgaging climbs to 57% of all buy-to-let business
  • Mortgages for first-time landlords just 10% of buy-to-let mortgage applications
  • Landlords lock in lower finance costs to mitigate the impact of tax changes

The proportion of landlords looking to remortgage is now at an all-time high according to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index which has been capturing the experience and views of approximately 200 mortgage intermediaries on the development of the UK mortgage market each quarter since 1995.

The latest survey, tracking developments for the third quarter of 2018, highlights a sharp increase in the proportion of landlords remortgaging, up from 49% in the second quarter to 57% of all buy-to-let business.

In contrast, the proportion of first-time landlord business fell from 14% to 10% and landlords looking for finance for portfolio expansion was down from 23% to 19% of the total.

The proportion of landlords remortgaging first outstripped those seeking funds for portfolio expansion back in 2015 following the announcement of significant tax changes for landlords in the Summer Budget.

Since then, remortgaging has continued to rise almost inexorably and today six out of ten intermediaries say the main reason that landlords are remortgaging is to secure a better interest rate.

In total, buy-to-let represented 19% of intermediary business in this quarter, with the remainder taken up by mortgage applications from owner-occupiers.

John Heron, Managing Director of Mortgages at Paragon, said:

Landlords are investing less in the Private Rented Sector which, in time, is going to make it more difficult for tenants to find a property at a rent they can afford. This is clearly a response to the increase in costs that landlords face following changes to stamp duty and tax relief on finance costs.

It’s no surprise therefore to see that landlords are taking the opportunity to reduce their mortgage finance costs as one part of their strategy to mitigate the impact of higher taxation. Tax bills due in January 2019 will include the first phase impact from the withdrawal of mortgage interest tax relief and landlords are preparing carefully for the next stages ahead.

View the full FACT Q3 2018 report

23 October 2018

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