When you look at the most recent Landlord Trends research for the second quarter of this year, carried out by Pegasus on behalf of Foundation Home Loans, it is impossible to ignore just how central remortgaging has become for landlords.
The numbers tell their own story. Of those landlords who had a buy-to-let finance requirement recently, 61% were remortgaging, 19% took a product transfer (PT) and just 12% were arranging finance for a new purchase.
Add to that the fact six in 10 landlords with borrowing have had a fixed rate come to an end in the past two years and you get a picture of a market dominated not by expansion, but by refinancing, restructuring and stabilisation.
That of course is a fundamental market brokers should be leaning into and refinancing remains a mainstay of advice in the buy-to-let space. 40% of leveraged landlords intend to refinance over the next 12 months, typically across 2.4 loans each, while for portfolio landlords with four or more buy-to-let mortgages that rises to more than half, refinancing around three loans out of their 9.8 average holdings. Those are big numbers that brokers should be making the most of.
But perhaps the most interesting aspect of the data is not simply the volume of refinancing that is taking place, but how landlords are choosing to arrange it.
DIRECT VS INTERMEDIARY
The research shows two-thirds of landlords went through a broker for their most recent mortgage, remortgage or product transfer. That is encouraging. Yet almost three in 10 landlords (28%) went direct to a lender.
Within that group, 20% appear to know they were not getting advice, but 8% said they went direct to a lender and received ‘advice’. That should set some alarm bells ringing for brokers. We know the difference between advice and execution-only, but a small minority of landlords are clearly not making that distinction.
That 8% who believe they are getting advice when going direct is a concern, because by definition they cannot be receiving the kind of whole-of-market, needs-based recommendations that a broker is uniquely placed to deliver.
DUTY AND OPPORTUNITY
It is a strong message for the sector. Brokers must be proactive in targeting those landlords who go direct, whether they feel they are getting advice or not. The reality is, they are not, and that means there is a clear duty, as well as a commercial opportunity, to step in.
Because let’s be clear, this is not just about remortgaging for the sake of getting a new deal. Brokers are increasingly helping landlords restructure their borrowing to improve cashflow, refinance HMOs, MUFBs and short-term lets, or release capital to manage EPC upgrade costs.
With 61% of landlords still owning at least one property with an EPC rating of D or below, the need to access capital for improvement works is going to intensify. Brokers who can position remortgaging as a tool for stabilisation and portfolio optimisation, rather than expansion, will find themselves at the centre of their clients’ strategies.
This also speaks to a wider point about value. A landlord going direct for a PT may feel they are saving time or money, but what they are giving up is access to the full market, to products that might better suit their circumstances, and to professional advice that takes account of their individual needs.
Brokers can demonstrate the cost of going direct is not measured in fees but in missed opportunities – the chance to secure a more appropriate structure, to build resilience into their portfolio, to reduce their long-term costs, or to plan effectively for upcoming requirements and/or regulatory change.
INCOME STORY
And there is, of course, the income story for brokers. That 28% of landlords who go direct represents a significant number of potential cases, and not just for the mortgage business itself.
Every remortgage is a chance to revisit protection needs, to discuss insurance, to review wills and trusts, to build relationships with conveyancers, accountants and tax advisers. In other words, it is not only about replacing a mortgage rate, it is about creating a rounded, profitable and sustainable advice relationship.
What this all adds up to is a market where brokers can do more than just transact. They can educate, they can guide, they can protect, and they can grow their businesses.
Landlords are navigating an environment of higher interest rates, greater regulatory burdens and shifting tenant dynamics; the reforms of the Renters Rights Bill will soon become law. Many of them are not experts in these matters, or indeed, finance; they are investors trying to keep their portfolios viable. Brokers have the knowledge, the tools and the lender relationships to make that journey easier.
So my message is simple. Don’t wait for landlords to come to you with a refinancing need. Target those who think they can manage it alone. Target those who believe they are getting advice from a lender when they are not. Target those who are simply rolling over into a PT because it feels easier.
Because behind every one of those decisions is a missed opportunity for the landlord, and for the broker who should be working with them.
