Landlords re-mortgaging to save

Are you coming to the end of a fixed rate mortgage deal? If so it requires careful consideration of what to do next. Do you take the easy route and revert to your lender's standard variable rate (SVR), or do you put a bit more time in to compare mortgage rates and re-mortgage to the best possible deal? Really, it should always be the latter, especially as our research shows that doing so could save you over £2,000 each year.

Recent mortgage data shows that motivation to re-mortgage is at its highest level since October 2008 within the buy-to-let sector.

North for profit

Low average house prices and strong rents have helped to make Liverpool and the surrounding area the number one buy-to-let hotspot in the UK. The area benefits from a combination of low average house prices (£122,000) and strong rents (£990).

The Midlands is home to the second and third best performing investment locations, with average rental returns of 5.6% in Nottingham and 5.4% in Coventry. Greater Manchester (4.3%) and Portsmouth (4.2%) also make it into the top 10.

Only three of the top 10 buy-to-let hotspots are located in the South of England, and are restricted exclusively to coastal towns – Portsmouth, Bournemouth and Southampton – with student and holiday rental markets.

Mortgage repayments are one of the biggest expenses for landlords who do not purchase their investment property outright, and the size of the loan needed is impacted by housing costs. Within the top 10 buy-to-let hotspots, average annual interest-only mortgage costs vary significantly from £5,940 (Blackpool) to £13,548 (Bournemouth).

Demand is still strong

Despite most landlords being hit by changes to mortgage tax relief, appetite for further investment remains, new research has revealed.

According to the new report, the proportion of respondents looking increase their portfolios has risen from 45% to 48% since November 2016. It is also up on the 41% of landlords that were looking to expand their portfolios a year ago, just after the introduction of the stamp duty surcharge on purchases of additional property.

Over 200 property investors completed the survey, answering questions on their portfolios and how they were financed. Research found that landlords have been increasingly choosing to fix for five years instead of the more traditional three.

There has been a huge shift in investor preferences, with five-year fixed rates now the preferred option for 42% of landlords, up from 33% which is quite dramatic. Three-year fixed rates are now less popular even than 10-year fixes, being chosen by just 5% of respondents.

Swing towards Limited Company deals

The proportion of buy-to-let deals available to limited companies has doubled in just one year as the market responds to the government’s tax changes.

One year ago, limited company products made up just 9% of the buy-to-let market, but the figure is now more than 20%, according to research.

Limited companies were not affected by the changes to mortgage interest tax relief that were announced by George Osborne in 2015 and introduced on 6 April this year.

The changes mean mortgage interest tax relief will gradually be cut back to 20 per cent between 2017 and 2020, making a significant dent in landlords’ returns.