Landlords raising capital – to either act as a buffer from the impact of COVID or to invest in more property – pushed up the level of buy-to-let re-mortgage business in the second quarter of the year.
Research by Paragon Bank found that the ability to secure a better interest rate was the most common reason for re-mortgaging for 54% of landlords, while 30% re-mortgaged to raise capital.
This made it the second most popular reason, accounting for double the amount of business than all the remaining reasons combined.
Mortgage brokers reported that re-mortgages accounted for 60% of buy-to-let cases in the second quarter, up from 48% in the previous quarter, as new lending for house buying fell because of the lockdown.
Just Mortgage Brokers director Carl Shave says the 30% figure isn’t surprising.
“The two main drivers for people to re-mortgage is indeed for a better product and/or to raise capital,” he tells LandlordZONE.
“The reasons for the capital raising vary and although some landlords will use this as a way to shore up their defences in relation to any financial impact caused by the pandemic, the most popular reason continues to be to invest in additional property, especially portfolio clients who are looking to increase their property holding.”
Portfolio landlord growth
Paragon’s survey also highlighted the growing prominence of portfolio landlords in the sector; landlords who own four or more properties accounted for the highest proportion of buy-to-let mortgage business, rising from 25% in the first quarter to 28% over the last three months.
Moray Hulme, Paragon director for mortgage sales, says the findings show that landlords have not only been resilient during the recent challenges but have also been planning.
He adds: “The data also supports the idea that there is a shift towards a professionalisation of the private rented sector. This is positive because a higher number of professional landlords has been shown to correlate with higher standards in the sector.”