Lenders need to step up
The Buy-to-Let remortgage market will be busy in 2022 as 5-year mortgages taken ahead of 2017’s new underwriting standards start maturing. Our Buy-to-Let director analyses the market, what’s changed for landlords, and what lenders need to do to support and manage this increase in remortgage business.
While the Buy-to-Let market will be dominated by new business, holiday lets, and a focus on upgrading properties to meet EPC requirements in the coming months, the remortgage market will also play a large role in 2022.
Lenders need to step up within the mortgage industry. In January 2017, the PRA introduced its new underwriting standards, which require a more detailed assessment of a borrower’s personal finances and stress testing at a higher interest rate of 5.5%.
This made it more likely that landlords would need to provide larger deposits to secure the finances they need. Meanwhile, the mortgage interest tax offset investors had enjoyed radically changed in April, increasing costs for Buy-to-Let mortgage holders on top of the 3% SDLT surcharge introduced in April.
There were approximately 36 lenders in Q1 2017 compared to over 50 now. The Prudential Regulation Authority (PRA) introduced new underwriting standards, which combined with the low-interest rates of the time to increase the appeal of mortgages fixed over longer terms, hence the shift to 5-year fixed rates. Lenders need to step up in response to these changes.
Read more on ‘What holiday let investments can offer landlords in 2022’ here.
Industry data indicates a threefold increase in the number of five-year fixed-rate mortgages from December 2016 to January 2018. As these loans mature in 2022, a strong year is anticipated for the remortgage business. Lenders need to prepare for increased activity.”
Fears of rising inflation have prompted expectations of a further base rate increase by the Bank of England throughout 2022. This situation urges borrowers to secure loans soon and provides brokers with an opportunity to excel post-holiday season.
So, how can we respond to these demands to offer the best deals for brokers? Lenders need to step up to meet these expectations.
Technology shows the way
Lenders not hamstrung by monolithic back office systems have been able to absorb the changes the PRA and Government have thrown at them over the years.
“LendInvest has successfully upgraded our application portal. We’ve developed integrations that enhance our underwriting processes. These improvements help maintain service levels despite the increased complexity in our underwriting tasks.”
Lenders need to step up and innovate around the challenges posed since 2017 to be best placed to support fast refinancing now.
Keeping the personal touch is essential, so we make our underwriters and case managers available throughout the deal. Still, lenders who have been willing to innovate around the challenges posed since 2017 will be best placed to support fast refinancing now.
A better landscape
Today, landlords face a looming deadline to improve the quality of their properties through emissions and efficiency.
Many Green mortgage products linked to a property’s EPC rating are available, with discounts on both rate and fee compared to a standard product.
Making these deals available to landlords who haven’t had to refinance their properties for 5 years is also important. We offer even cheaper rates when a landlord uses our bridging finance to improve their EPC rating, with a free valuation and legal in the transition.
Given the economic outlook and high inflation, landlords find LendInvest’s 7-year fixed rate option appealing. This option has experienced significant take-up.
With interest rates from 2.88%, a 1% product fee, and ERCs covering just 6 years, what’s not to like for those looking to cement a mortgage payment during these uncertain times?
Managing portfolios
Landlords and brokers benefit from lenders’ knowledge of portfolio landlord options, including how tax is treated. Lenders must enhance their understanding of these dynamics to ensure smooth portfolio incorporations.
This awareness streamlines processes. Lenders can avoid underwriting an entire portfolio within six months after one deal. This approach simplifies mass remortgages. It also reduces the laborious task of reviewing each deal individually. Integrating tools like Open Banking and e-signatures aids this process.
Lenders need to step up and embrace these innovations to serve portfolio landlords better and meet their evolving needs.
An evolving market
Many changes have occurred in the Buy-to-Let market over the past five years. A good lender’s quality is measured by how well it manages, embraces, and overcomes these changes. These efforts should aim to enhance the experience for returning landlords.
This year, lenders can benchmark themselves against key measures. For landlords considering remortgaging, there is plenty of choice and much to consider.
Lenders must step up and ensure they’ve effectively navigated these changes to serve landlords better. In this evolving landscape, lenders need to demonstrate their adaptability to meet the needs of landlords in an ever-changing market.
Get instant quotes for the full buy-to-let range here.
Credits: Andy Virgo, Buy-to-Let Director