Around a third of landlords are planning to remortgage or go through a product transfer in the next 12 months, with landlords expecting to refinance around two-and-a-half deals on average.
According to research from Foundation Home Loans‘ Q2 2024 Landlord Trends report, which consisted of around 799 online interviews, around 60% of landlords borrow to fund their portfolios, having around 5.3 loans on average, which goes up to 14.4 loans for landlords with 11 or more properties.
Within those that are refinancing, 38% have one mortgage to refinance, 34% have two deals due to refinance, 12% have three products, 8% have four deals and 7% have over five mortgages maturing.
Foundation Home Loans said that landlord borrowers have £654,000 in total on average, equal to around £125,000 per buy-to-let (BTL) mortgage.
The report stated that total borrowing ranges between £268,000 for non-portfolio landlords and £1.16m for portfolio landlords. A fifth of landlords owe more than £1m.
Foundation Home Loans said that the level of mortgages due for refinance and the amount owed was a “sizeable opportunity” for advisers to offer solutions to clients and earn strong procuration fees for remortgages.
Approximately 10% said they plan to grow their portfolio in the next 12 months, with 67% saying they will use a BTL mortgage, 29% buying outright, 31% releasing equity from existing properties, 10% using a commercial loan and 5% using funds drawn from a pension pot.
Limited company is dominant option
Foundation Home Loans said that limited company was still dominant as a preference for landlords, especially for new purchases, with around 67% saying that they would choose a limited company structure for new acquisitions.
Average rental yields have reached a 10-year high of around 6.3% and tenant demand has been reported as strong by around 82% of respondents.
Nearly three-quarters of landlords have said they have increased rents in the second quarter of this year, which the lender said was driven by “increasing portfolio management expenses and rising mortgage finance costs”.
More than half of landlords said rent controls would impact their commitment to the private rental sector (PRS) and a third said they would sell if they were introduced.
Landlords finding ways to ‘maintain profitability and expand their portfolios’
Grant Hendry, director of sales at Foundation Home Loans, said despite a “challenging market environment”, landlords were finding ways to “maintain profitability and expand their portfolios”.
He continued: “Average rental yields increasing, the ongoing preference for limited company ownership and high tenant demand are all encouraging trends [that] keep on emerging and should provide mortgage advisers with [the] opportunity to secure business and help landlords navigate the market.
“There is clearly a significant remortgage market to target in the months and weeks ahead, with a number of the landlords surveyed outlining how they had multiple mortgages coming to an end, which will need refinancing.”
Hendry said that with the interest rate environment improving, the “opportunity to remortgage” is “greater than in the last couple of years, and we’ll see a growing cohort of landlord borrowers able to remortgage to a different lender rather than simply have to accept a product transfer”.
He said this was a “strong opportunity”, as brokers can talk to existing landlord borrowers about other needs they might have.
“The cost of financing properties and portfolios, even with higher yield and strong tenant demand, continues to sit heavily with landlords and is impacting their views on whether now is the time to add to portfolios. It is to be hoped the new government is committed to increasing supply in the PRS, as it certainly requires more housing in order to meet the tenant demand that is so clearly there.
“As the market evolves, we would urge advisers to stay informed about regulatory changes such as potential rent controls and the removal of Section 21.
“By providing expert advice and comprehensive mortgage solutions, advisers can help landlords navigate these challenges and capitalise on opportunities, ensuring the continued growth and profitability of their portfolios,” he explained.
Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.
She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.
In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.
She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.
Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.
In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.
