With many thousands of landlords set to come off two and five-year fixed rates in 2025 it makes more sense than ever to reach out and discuss remortgage options with your clients.
Over 400,000 landlords now hold properties in limited companies due to the tax advantages offered, but many continue to retain property in an individual name for any number of reasons and those clients may appreciate a refinancing conversation more than most.
The evolving buy-to-let landscape has given landlords plenty to consider in recent years. Investors need quality financing insight and advice more than ever before on a vast range of issues from changing mortgage pricing to specific product options based on a variety of factors including property type, EPC level, rental yield, affordability, portfolio ambitions and much more.
Having a clear understanding of client ambitions, risk appetite and strategy certainly helps in ensuring you’re the first port of call for support both now and in the future.
Plus, with tenant demand in the private rental sector (PRS) strong compared to supply, landlords want to add to portfolios with additional opportunities through remortgage as landlord borrowers reach the end of their fixed-rate mortgages.
This is an area of the market which is much more likely to look ‘traditional’ in scope, with a lending landscape which looks like it did in those pre-2016 days before the mortgage interest tax relief advantages were taken away from landlords.
So, while we see a huge majority of landlords purchasing new property within limited company vehicles, in order to benefit from the higher tax relief available, there are a whole cohort of landlord borrowers who continue to hold property in their individual names, given that any attempt to move those properties into a limited company vehicle is treated as a sale and therefore incurs a stamp duty cost.
And, as we know, the cost of stamp duty has continued to increase, with the introduction of the initial 3% surcharge for additional homeowners moved up last year in the Labour Government’s first Budget to 5%.
On top of this, we have stamp duty thresholds moving back to their lower level from the 1st April, which makes it even more costly for landlords to move properties to limited companies, and therefore the likelihood of these existing properties remaining owned in their individual names remains high.
The mortgage ‘life’ of the landlord borrower coming up for remortgage is interesting in itself given the fluctuation in rates over the past two to three years. According to the latest figures from UK Finance, in Q3 2024 there were 1.4 million buy-to-let fixed-rate mortgages outstanding, a figure up 3% on the previous year.
At any given time, a significant number of those are coming up for redemption, but of course the deals they are likely to be coming to the end of, are likely to be quite different. For instance, brokers are likely to be seeing fortunate landlord borrowers who have benefited from five-year fixes at much lower rates than that which has been achievable in the past few years.
But there are also those landlord borrowers who unfortunately had to refinance towards the end of 2022/start of 2023 when we saw product rates jump significantly. Affordability was a challenge then, and many may have opted for a product transfer from their existing lender. These landlords may have more opportunities now as rates have dipped, affordability has eased and, hopefully, equity growth has been achieved.
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Whatever the circumstances for the landlord borrower, they will undoubtedly require mortgage advice because the market situation is very different to that of 2020 or 2023.
And while some landlords will be looking to access equity growth achieved over that time, others may be looking for a like-for-like, pound-for-pound remortgage, either at a better rate, or at a more competitive one than previously secured. Or simply putting them in a better position, one which will align with a renewed strategic/portfolio goal and ambitions.
The landlord borrower who is looking to remortgage with no extra borrowing is certainly a key product space for us at Bank of Ireland for Intermediaries. For example, we have recently improved our Interest Cover Ratio (ICR) for landlords who own in their own name and will now consider rental income at 125% of the monthly interest cover, plus we have no minimum income requirement for the landlord.
Our like-for-like remortgage solution may also work for landlords who have a maximum of three properties, all individually below 75% LTV. On top of this we offer top-slicing, where we’re able to add a proportion of the landlord’s salary to the affordability calculation, which can also help borrowers sensibly reach their target loan amount.
Top-slicing is available where rental income is at least 100% of the monthly interest due for applicants with a minimum household income of £40,000. The rental calculations for properties owned in an individual’s name are often stressed at a higher rate than those for limited company, so it’s worth using our mortgage calculator to see if we can help your client.
Overall, there is a significant opportunity for brokers with buy-to-let clients coming up for remortgage, particularly if there is no requirement for extra borrowing, as a range of factors and offers are available to these clients that may not have been available to them back when they were either buying the property, or when they were last seeking to refinance.
More competitive rates, an easing of affordability, ICR improvements, top-slicing where required, are all available for remortgaging landlords, and we are here to support brokers as they seek to secure the best possible outcome for these clients.
