The buy-to-let remortgage opportunity has been well documented. According to data from UK Finance, there was £27bn worth of buy-to-let remortgaging in 2021 and it is expected to remain at this level in 2022. However, in 2023 UK Finance predicts that buy-to-let remortgaging will increase by more than 22% to £33bn.
One of the drivers behind this opportunity is the wave of buy-to-let purchase business that took place at the beginning of 2016 ahead of the 3% increase in Stamp Duty Land Tax that April. Many landlords purchased those properties using a five-year fixed rate mortgage because of the benefits around stress testing and these deals have now lapsed, leaving landlords free to refinance their loan.
Another driver is, of course, the rising interest rate environment. Inflation was already a serious issue ahead of the situation in Ukraine and now, with increasing fuel prices adding to the growing cost of living, there is certain to be increased pressure on the Bank of England to continue the interest rate rises it has already started. The cost of borrowing only looks like heading in one direction, so for any property investor planning on remortgaging, there is impetus on doing this sooner rather than later.
The motivation to remortgage is exacerbated for portfolio landlords who own a number of different properties, some of which may be more complex investments such as HMOs, holiday lets or multi-unit blocks. However, the mechanics of arranging many different new loans at the same time can be cumbersome and costly. Fortunately, there is another way.
For portfolio landlords who want to refinance numerous properties, there are specialist buy-to-let lenders that are able to offer portfolio remortgages, with a single loan secured against multiple assets. This type of remortgage will use an average LTV across the portfolio, which is beneficial for investors who have some assets that are more highly leveraged than others. Investors can also release equity to finance further expansion of their portfolio and some lenders, like Castle Trust Bank, can even include more complex property investments as part of the loan, structuring a solution built for the specific requirements of an individual client.
When considering a portfolio remortgage, it’s also worth thinking about the overall cost of borrowing rather than just the headline rate, as fees can vary and some lenders that specialise in this area may also offer incentives. For example, at Castle Trust Bank, we offer a valuation incentive scheme at the moment that pays out a cashback of up to £5,000 + VAT and this can significantly reduce the overall cost of borrowing.
By way of example, we recently had an application for a £14.6m portfolio. We split the transaction into two separate cases, each of about £7m and this enabled us to double the valuation cashback. The total valuation costs were between £25k and £30k and the client was able to claim back £10k + VAT, significantly lowering their costs.
For investors and for brokers, a portfolio remortgage can provide an efficient and effective way to refinance several properties at once, saving time and multiple fees. So, if you have plans to make the most of the buy-to-let remortgage opportunity and you have clients who are portfolio landlords, think about how a portfolio loan could provide a streamlined way for them to achieve their objectives.