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 we can expect the coming months in the Buy-to-Let market to be dominated by new business, holiday lets, and a focus on upgrading properties to meet EPC requirements, the remortgage market will also have a large role to play in 2022.
Lenders need to step up within the mortgage industry. January 2017 saw the introduction of the PRA’s new underwriting standards, requiring 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 the April before.
There were approximately 36 lenders in Q1 2017 compared to over 50 now. Those new underwriting standards, introduced by the Prudential Regulation Authority (PRA), 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.
With industry data showing a threefold increase in the number of five-year fixed-rate mortgages written between December 2016 and January 2018, we’re anticipating a strong year in 2022 for the remortgage business as many of these loans mature. Lenders need to step up.
Fears of soaring inflation have led many to expect the Bank of England to further increase the base interest rate throughout 2022, so borrowers may be keen to lock in another loan sooner rather than later, offering an opportunity for brokers to hit the ground running after the festive break.
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.
Indeed, the ability for LendInvest to bolt upgrades onto our application portal and develop further integrations that result in frictionless enhancements to our own underwriting processes has resulted in service levels being met even with more to consider in the underwrite now.
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.
A plethora of Green mortgage products linked to the EPC rating of a property is 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, which is why 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 as well.
Noting the economic outlook and soaring inflation, the option of longer-term products has proved appealing to landlords, with the LendInvest 7-year fixed rate option seeing huge take-up.
With interest rates from 2.88% alongside 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?
Landlords and brokers alike benefit from lenders’ increased knowledge and awareness of the choices open to portfolio landlords, especially regarding how tax is treated. Lenders need to step up their game in understanding these dynamics to facilitate smooth portfolio incorporations.
Such awareness streamlines processes, allowing lenders to avoid the need for underwriting an entire portfolio within six months after one deal. This approach simplifies mass remortgages and considerably reduces the laborious task of reviewing each deal individually by integrating tools like Open Banking and E-Signatures.
Lenders need to step up and embrace these innovations to serve portfolio landlords better and meet their evolving needs.
An evolving market
A lot has changed in the Buy-to-Let market in the past five years, and the measure of a good lender will be how those changes have been managed, embraced, and overcome to make the returning landlord experience better than it was before.
This year offers a chance for all lenders to benchmark themselves against those measures, and for landlords, there’s plenty of choice and much to consider when remortgaging this time around.
Lenders need to step up and ensure they’ve effectively navigated these changes to serve landlords better. In this evolving landscape, lenders need to step up and demonstrate their adaptability to meet the needs of landlords in an ever-changing market.
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Credits: Andy Virgo, Buy-to-Let Director