But-to-let re-mortgages forge ahead

Re-mortgage instructions recovered to pre-lockdown levels last week, with an increase of nearly 40% compared to the previous seven days, according to recent data.

In the third week of May data recorded the highest volumes of re-mortgage instructions since the week commencing March 9 before lockdown measures were introduced.

Buy-to-let re-mortgage completions are 3.7% lower than the average for the same period last year.

Re-mortgage instructions have spiked since the reopening of the housing market last Wednesday (13 May) as borrowers take the opportunity to capitalise on the increased number of products available on the market and make financially savvy decisions to ensure they have the best products for them.

Restored market confidence and the consequential increase in instructions will continue as additional higher LTV products are brought back to the market and borrowers are able to alter loan amounts or change lender. The industry must continue to work together as demand will likely continue to increase in the coming weeks.

More and more landlords are looking at alternatives

There is yet more evidence that an increasing number of buy to let investors are setting up companies to offset the worst impact of changes to mortgage interest tax relief.

The latest Mortgages for Business “Limited Company Buy to Let Index” reveals there was a surge in the proportion of applications for buy to let properties made by landlords using limited companies at the end of 2019.

Over the past 18 months, landlords’ behaviour has changed as the sector comes to terms with the new tax regime. The increased use of Limited Company structures includes both new purchases and transfers - that is, purchases made by landlords selling their personally owned property to their limited company.

The proportion of re-mortgage applications made via Limited Company structures also increased substantially of the last 12 months and figures show this trend is continuing into 2020.

Rates are still falling but for how long?

Research shows that the average two-year fixed BTL mortgage rate has fallen by 0.35% in just one year, and even though the pace of the fall has slowed in recent months – the vast majority of that decrease took place last year.

The figures also show that the market has now recovered from the significant drop in products that was seen at the start of this year, suggesting that landlords can benefit not only from low rates, but also a higher number of mortgages to choose from. The choices have also increased in the limited company sector as well.

The BTL market has seen some turbulent times, with significant tax changes, tougher affordability rules, and still more changes to come. Yet, rates have continued on a downward spiral.

New regulation brought tighter affordability rules into play, effectively reducing the amount that landlords can borrow. This had a knock-on effect on availability, and indeed the pace of rate cuts, yet it seems that the market is recovering.

Renting demand increases

Across the UK by region and price band, demand for rented homes has surged by 30% since 14 April 2020, suggesting the rental market is regaining momentum, according to the latest Rental Market Report.

This follows an initial decline of 57% in the two weeks to 30 March, driven by the coronavirus crisis. In the same period, the sales market was hit by a 70% decline in buyer demand.

There has been no mass withdrawal of properties listed to let, as the total number of properties listed as available remains broadly unchanged, down just 3% compared to 1 March.

The research also found that the number of moves per year in the lettings market is expected to drop by 25% in 2020 compared to 2019.

Rental supply has increased ahead of the lockdown as landlords switched from the short to the long-let market, but growth in new supply has since slowed.

Annual rental growth in the UK stands at +2.4%, up from +1.5% in March 2019; rental growth is expected to moderate over the rest of the year but remain in positive territory.