Re-mortgaging could save landlords more than £3,000 a year

That is according to an independent survey, which has been investigating the cost to borrowers of slipping onto their lender’s standard rate after their initial mortgage deal has finished.

When borrowers reach the end of their introductory offer, they can re-mortgage to find a better deal. However, if they do nothing, they will automatically start paying their lender’s standard variable rate (SVR), which is generally higher.

As an example a landlord with a typical loan of £173,677 (Average). If they sat on their lender’s SVR for six months or more, paying an average rate of 4.39%, they wold pay £7,549 in annual interest. But, by switching to a two-year fixed-rate deal at 2.3%, they would pay £4,100 per year in interest – a difference of £3449.

Buy-to-let mortgage choices keep growing

Competition has intensified in the buy-to-let mortgage market as providers see this as an area of growth for 2019 and beyond. More products as well as cheaper charges and fees are now common place, and this has to be good news for the investor. All this may seem surprising due to the Governments crack down on buy-to-lets but the facts are this market is very much alive.

The huge choice of buy-to-let mortgage products has beaten all the previous records. There are now over 1000 different products available compared to 850 at the end of last year. We are also finding new lenders are joining this growing market.

Landlords re-mortgaging

The proportion of landlords looking to re-mortgage is now at an all-time high.

There’s been a sharp increase in the proportion of landlords re-mortgaging in Q3, up from 49% in the Q2 to 57% of all buy-to-let business. In contrast, the proportion of first-time landlord business fell from 14% to 11.8% and landlords looking for finance for portfolio expansion was down from 23% to 21% of the total.

Landlords are investing less in the private rented sector which, in time, is going to make it more difficult for tenants to find a property at a rent they can afford. This is clearly a response to the increase in costs that landlords face following changes to stamp duty and tax relief on finance costs.

It’s no surprise therefore to see that landlords are taking the opportunity to reduce their mortgage finance costs as one part of their strategy to mitigate the impact of higher taxation. Tax bills due in January 2019 will include the first phase impact from the withdrawal of mortgage interest tax relief and landlords are preparing carefully for the next stages ahead.

Landlords need to look at better returns

Many surveys show the best yields are now in the North of England, with its low capital values and reliably strong rents.

A recent survey analysed over 500,000 homes across 2,700 postcodes, finding the bulk of the 25 highest yields (ranging up to 13%) in the north.

If you do sell to buy elsewhere, remember some evergreen rules: locations with strong employment stats and transport links and substantial student populations, typically provide the best returns. But always check local agents to assess on-the-spot market conditions.