Rise in landlords looking to release equity from portfolios

Rise in landlords looking to release equity from portfolios

There has been a significant increase in the number of landlords who intend to release equity from their existing portfolios, according to research from Foundation Home Loans.

The lender found that as the value of an average ‘portfolio landlord’s’ properties – those with more than four buy-to-let mortgages - exceeds £2m, more landlords are looking to release equity. 

This was true for portfolios with an average LTV of 56.2 per cent.

The research, conducted by BVA BDRC between the June 20 and July 5, comprised answers from 753 ‘consumer’ and ‘portfolio’ landlords.

It showed that of the 30 per cent who said they intend to remortgage in the next 12 months, a third are doing so in order to release equity from their portfolios.

George Gee, commercial director at Foundation Home Loans, said: “We’ve seen the buy-to-let market moving steadily towards a greater level of professionalism for some years now, and this has meant a growing number of landlords are now defined as ‘portfolio’ operators and have long-term plans which involve making the most out of their properties."

Foundation said it was likely the released equity would be put towards further purchases.

The research also showed portfolio buy-to-let landlords were more likely to want to remortgage in the next 12 months (43 per cent), compared with their ‘consumer’ landlord counterparts (20 per cent) – those with one to three mortgaged properties.

Growing confidence

Larger landlords were typically more upbeat about the prospects for their own letting businesses, signalling the growing strength of the lettings market, Foundation said.

Almost half (46 per cent) of portfolio landlords said they felt upbeat, compared with 35 per cent of consumer landlords.

For landlords who own more than 20 properties, this rose to 50 per cent.

Foundation said this could be based on the recent growth in values and the extra equity in properties that landlords may feel they can now access in order to leverage.

However, research last month showed that a fifth (20 per cent) of landlords are considering selling all - or at least part - of their portfolios.

Nottingham Building Society found tax changes and increasing regulation meant the number of landlords planning to sell now outnumbered those planning to buy more properties.

Foundation said in Q2 2021, the typical portfolio was worth around £1.25m across all landlord types and generating an annual gross rental income of £54,000. 

Based on an average Q2 portfolio of 6.9 properties, the typical individual value of a property was £182,609.

Specifically for portfolio landlords with more than four mortgaged properties, average portfolio values recovered in Q2 to over £2m for the first time since Q3 of 2020, with the current average LTV ratio of a portfolio of any size at just 49.5 per cent.

Additionally, 40 per cent of all properties owned within an average portfolio were owned outright, with this presenting existing landlords with an opportunity to tap into equity levels which might have been boosted by increases in house values.

Gee said: “The research shows a number of key portfolio landlord intentions, particularly around extracting equity from their properties.