In an exclusive interview with BTL Insider, Louisa Sedgwick, commercial director for mortgages at Paragon Bank (pictured above) explains why remortgaging is set to return in 2024 and how brokers can support the large volumes of landlords with mortgages reaching maturity.
What will be some of the key drivers of BTL mortgage business this year?
Maturities will be an important source of BTL business this year. I say that with some certainty because following regulatory changes implemented in 2017, five-year fixes increased in popularity, resulting in large numbers of landlords looking to refinance from 2022 onwards. In fact, industry data highlights how over 200,000 fixed-rate mortgages will be up for renewal in 2024 — that’s a lot of business!
Do you expect to see an increase in landlords remortgaging this year?
The year has started positively with recent Moneyfacts analysis highlighting how rates on both two- and five-year BTL fixed-rate mortgages have hit their lowest point since September 2022. Various forecasts from the ONS and Oxford Economics point to an improving economic picture, and this leads me to be pretty confident that product rates will be lower this year than in 2023.
This makes remortgaging more of an attractive option for landlords, especially for those who are keen to expand their portfolios. Our recent Portfolio Landlord Report revealed that 37% of landlords who own four or more properties intend to increase the size of their portfolio in 2024, with more than half of those raising additional capital on an existing property to fund new purchases. Additionally, almost eight in 10 landlords who remortgaged with us last year borrowed additional funds, most commonly to maximise opportunities in the market and invest in new properties.
Is there still a place for product transfers in a market with increased remortgaging?
Yes, I think so — product transfers offer a solution to landlords who may struggle to meet affordability requirements as there is no requirement for fresh stress testing, helping landlords to avoid reverting to SVR products.
Product transfers may well still be the best option for some landlords, such as those who want pound-for-pound finance, but this will, of course, be influenced by interest rates and the borrower’s individual circumstances and strategy.
What other trends do you expect to see in the BTL market this year?
I think an improving economic environment may also influence the substantial proportion of landlords who hold properties with no outstanding debt against them, above 60% of private rental housing have no mortgage. Unencumbered landlords made up a quarter of the remortgage business we wrote in 2023; again, often to fund portfolio growth strategies.
As spring is here, when the weather is more suitable for undertaking building works, we’re likely to see a rise in those who wish to upgrade a property they already own, whether that be their own homes or those let out to tenants.
What should brokers do to support landlords in the current market environment?
It’s important to keep in regular contact with customers — doing so will help brokers to move from more of a ‘one and done’ type transaction to building relationships. Having an understanding of landlord strategies will help to identify future opportunities.
There is so much that landlords need to know to manage their businesses effectively and legally — including regulation, market and economic trends — so many will be grateful for the support offered by brokers. Moving from a transactional approach, whereby each application is managed in isolation, to one where there is more of a holistic view of a landlord’s lettings operation is a great way of highlighting potential business on the horizon for brokers.
