Buy-to-let  

Landlords remortgage with an eye to expansion

Landlords remortgage with an eye to expansion

Buy-to-let landlords are remortgaging with a view to expanding their portfolio and growing their cash reserves, according to Mortgages for Business.

Research based on buy-to-let remortgage data recorded by the broker between Q1 2015 and May 2020 found three in 10 property investors in April and May said they were taking out a buy-to-let remortgage with the hope of growing their portfolio. 

Growing cash reserves was also found to be the top priority for landlords who were remortgaging.

According to Mortgages for Business the findings marked a contrast from last year, when the main concern of remortgaging landlords was to manage risk, for example by moving away from variable rate products and onto a longer fixed-rate mortgage.

Steve Olejnik, managing director of Mortgages for Business said: “Our research suggests the number one priority of active, professional landlords is to set themselves up with a war chest so they can look for growth. Smart landlords know that the time is coming to bag some bargains and start expanding portfolios. Increasingly, that is where their remortgaging priorities lie”.

Mr Olejnik added: “Twelve months ago, in 2019, a lot of the landlords we worked with were looking to guard against risk. That’s shifting now as opportunities to purchase cheap properties presents themselves. With property prices poised to drop before the end of the year, the balance between risk and reward is shifting. It will be interesting to see how landlords’ investment strategies adjust to changing tenant demand”.

The research reflects observations by some mortgage advisers last month of investors looking to raise funds for potential quick purchases.

Additionally, the survey found  landlords were increasingly looking to manage their cash flows. Lowering monthly payments was the second most important concern in April and May among landlords when remortgaging, compared to last year when it ranked third.

Aaron Strutt, product and communications director at Trinity Financial, said: “We have had a steady increase in buy-to-let enquiries from landlords since the lockdown finished and they are keen to purchase more investment properties".

Mr Strutt said it was “not surprising” landlords wanted to build up their cash reserves given the current “economic uncertainty”, adding that they would have to cover the cost if their tenants encountered financial difficulties.

Similarly on a Mortgage Market Alliance podcast earlier this month, Liz Syms, chief executive of Connect for Intermediaries, said landlords may have taken payment holidays to preserve their cash flow, in the event their tenant would be unable to pay rent.

However, brokers have warned that buy-to-let landlords face uncertainty over whether any coronavirus-related payment holidays might affect their future mortgage applications.

chloe.cheung@ft.com