The Intermediary – March 2025 - Flipbook - Page 22
SPECIALIST FINANCE
In focus
Brokers need
buy-to-let options
E
xpectations of another
rate cut were met in
early February, when
the Bank of England’s
Monetary Policy
Commiee (MPC)
voted by a majority of seven to two to
reduce the base rate to 4.5%. The two
who voted against did so because they
wanted to go further and cut the base
rate down to 4.25%.
A slew of lenders moved to cut their
own rates in the days that followed,
with Nationwide, Barclays and
Santander launching competitive low
loan-to-value (LTV) deals under 4%.
An estimated 1.8 million fixed rate
mortgages are set to mature in 2025,
according to UK Finance, of which
around 800,000 are set to come off
rates under 3%.
Overlooked
In a year when refinancing will be
crucial for so many borrowers, it’s
easy to overlook landlords, but they’re
facing stronger headwinds than most.
2023 saw the size of the buy-to-let
(BTL) market shrink for the first time,
with the number of new mortgage
loans being granted falling from
25,280 in Q4 2022 to 12,422 in Q1 2024,
according to UK Finance figures.
2024 has been more resilient, with
house purchase lending to landlords
up 13% to £10bn. Overall, gross
buy-to-let lending last year rose,
from £30.2bn in 2023 to a projected
£33.2bn in 2024. As in the residential
sector, this growth was in response to
the lowering of new mortgage rates
through the year.
Borrowing is likely to see a modest
uptick in activity in 2025 following
February’s rate cut, with landlords
having more flexibility to rebalance
their portfolios’ LTVs thanks to beer
affordability. This will also trigger
some to sell, and others to expand
their portfolios.
There is further evidence that the
transition of the market overall from
22
The Intermediary | March 2025
privately held buy-to-lets to limited
company ownership is still underway,
affecting lending paerns.
According to data from the
Intermediary Mortgage Lenders
Association (IMLA), the number
of outstanding BTL mortgages fell
by 31,500 in the nine months to
September 2024. IMLA suggests that
there is anecdotal evidence from estate
agents showing a rise in the number
of landlords selling, especially
among non-portfolio landlords with
a small number of properties in their
own names.
The make-up of borrowers in the
market may be changing, but this
just presents intermediaries with the
opportunity to be of immense value to
landlord clients.
This year, UK Finance has warned
that conditions look challenging. The
Stamp Duty surcharge for landlords
rising from 3% to 5% immediately
aer the Chancellor Rachel Reeves’
autumn Budget has put additional cost
into purchases.
The lender trade body expects that
change to dampen buy-to-let purchase
activity, bringing it down by 7% to
£9bn in 2025.
Nevertheless, landlords themselves
are ‘cautiously optimistic’ that gross
buy-to-let lending in 2025 will be
higher than the forecasted amount
of £32bn in 2025, according to the
National Residential Landlords
Association (NRLA).
Remortgage and PT
In 2023, there was a greater proportion
of product transfers undertaken; of
those product transfers, the majority
of landlords selected a 2-year product.
These 2-year product terms will come
to an end throughout 2025, and those
landlords will be looking to reassess
their options.
Remortgage activity in the buyto-let sector is likely to be more
resilient, but landlords increasingly
need specialist advice to navigate
ROB MCCOY
is senior product and business
manager at TMA
refinancing in a market that is already
dealing with regulatory and taxation
challenges.
UK Finance figures show that there
was a 69% annual rise the value of new
lending to limited company borrowers
– equal to £1.5bn – in Q2 2023, a likely
correlation with the phasing out of
tax relief on buy-to-let mortgage
interest, which began in 2017 and
ended in 2020.
During that time, the majority of
landlords making new purchases
bought through a limited company to
mitigate the impact of the tax changes
on their profits.
Those on 5-year terms are now
coming to maturity, which is going
to drive a lot of remortgage business
this year.
As in the residential market, last
year saw more borrowers remortgage
to another lender. UK Finance figures
show an 18% drop in the number of
buy-to-let product transfers conducted
in Q2 last year.
Buy-to-let mortgage rates are more
competitive this year, and yields are
still strong where the commercials
stack up well. We’re of the view that
the buy-to-let market will continue
on its path towards larger portfolio
landlords operating through limited
companies and specialising in higher
yielding houses in multiple occupation
(HMOs), multi-unit freehold (MUB)
and leasehold blocks, new-builds and
holiday lets.
This is not vanilla lending –
underwriting deals of this kind
requires specialist knowledge and
expertise. It is more complex and
as such requires a common-sense
approach, as well as access to a broad
range of specialist lenders that can
meet this demand. ●
