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Mortgage intermediaries expect landlord business to stabilise

  • Majority of intermediaries expect landlord business to stabilise over the next twelve months
  • First forecast for stable outlook since 2015 Summer Budget
  • Remortgaging continutes to make up the bulk of buy-to-let mortgage applications

The majority (65%) of mortgage intermediaries expect the level of landlord business to stabilise over the next twelve months, according to Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index, based on interviews with 200 mortgage intermediaries.

This is the first time that intermerdiaries have forecast a stable outlook for buy-to-let since the 2015 Summer Budget when George Osbourne, then Chancellor of the Exchequor, announced plans to phase out tax relief on buy-to-let mortgages.

The first round of tax changes, which are being phased in between 2017 and 2021, were implemented in the 2017-2018 tax year and will affect tax payments due by midnight on 31 January 2019.

Taken together with the 3% stamp duty surcharge on rental properties and new PRA rules on buy-to-let affordability and underwriting, the tax changes have had a significant effect on property transactions. Latest figures from UK Finance show that buy-to-let mortgage purchase transactions have fallen by around 40%, dropping from 8,900 in May 2015 to 5,500 in May this year. Landlord remortgaging however has risen sharply over the same time period, up 64% from 8,900 transactions to 14,600.

Intermediaries say almost half (49%) of landlord mortgage applications are for a straightforward remortgage, with six out of ten landlords who are remortgaging looking to lock in a better interest rate.

Encouragingly, this quarter’s FACT results also include the first increase in the proportion of landlords raising finance for portfolio expansion since 2015 - up marginally from 22% in Q1 2018 to 23% in Q2 - and a small increase in applications from first-time landlords, edging up to 14% of the total.

John Heron, Managing Director of Mortgages at Paragon said:

It’s encouraging to see intermediaries forecast a more stable outlook for buy-to-let business after such a long period of negative sentiment. Purchase activity continues at much lower levels but it is interesting to see the step up in remortgage business as landlords look to maximise certainty and minimise costs as the interest rate changes start to take effect.

View the full FACT Q2 2018 report

14 August 2018

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