This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Category: prs
Landlords, just like any business owner, have long adjusted their strategies to weather storms and remain profitable. Foundation Home Loans share recent data showing just how today’s landlords are doing this.
Specialist mortgage lender, Foundation Home Loans (FHL), has released the details of its Quarter 1 2024 Landlord Trends report, conducted for them by Pegasus Insight. Within the report are details of how landlords have adjusted their property investment strategy over the past 18 months, to counter against rising costs.
Key tactics employed by landlords
When gathering the data, respondents could share multiple responses.
30 per cent of those surveyed renegotiated their mortgage with their existing lender, 29 per cent had increased rents, 25 per cent had not gone ahead with plans to buy property, 22 per cent had remortgaged to a new lender, 15 per cent said they had used non-rental income (such as their savings) to pay monthly mortgage costs and another 15 per cent said they had sold a property to reduce monthly costs.
Other tactics landlords said they have employed to reduce their outgoings, is to do more of the work to manage their properties themselves (17 percent). 8 percent had opted to self-manage completely, having stopped using an agent in order to mitigate costs.
Mortgage advice critical to property investors
With so many lenders and product options in the buy to let industry now, and changing needs from landlord investors, it is not surprising to find that FHL’s data showed that a large proportion of the landlord community turn to mortgage advisors to arrange their buy to let mortgages.
68 percent of landlords had used an advisor to arrange their most recent mortgage, and this requirement for expertise was even more apparent with portfolio landlords, owning four or more properties – at 72 per cent.
By comparison, only 26 per cent of landlords said they went direct to a lender, 3 per cent had used an online broker or ‘robo-advice’ platform, and just 1 percent had used a comparison site.
Investment intentions for the year ahead
Where it came to future investment plans amongst landlords for the next twelve months, 40 percent plan to remortgage or product transfer.
As far as the volume of mortgage transactions the surveyed landlords were expecting to do, 49 per cent said they had one property to refinance, 24 per cent had two, 11 percent had three, 7 per cent had four and 9 per cent had over five mortgages they would need to arrange.
Using a buy to let mortgage to fund property transactions came out top with 48 per cent saying this was amongst their chosen route. Multiple answers were allowed in answering this question, and the other options in the mix included 38 per cent intending to buy outright, 38 per cent again who would release equity from property they owned and a significant proportion of 15 per cent planned to use pension funds.
With the various options available for pension investment, this reliance on bricks and mortar for a return on those funds is telling.
Rate strategies
There is a lot of change in the mortgage market at the moment, and whilst in time it is expected that the Bank of England Base Rate will come down, with likely positive impact on mortgage rates, the UK and global economy is highly changeable.
Perhaps in anticipation that the mid-term forecast may be for rates to come back down, a modest majority of landlords surveyed by FHL said they would opt for a shorter two-year fixed rate. This would tie-in a deal over a shorter period than its five year alternative, in anticipation of a change to a lower rate sooner, but would still give certainty over monthly payments.
Around a third of landlords reported that they simply did not know what sort of rate they would go for at this time or would take advice nearer the time.
Speaking on the subject of the survey results, FHL director of sales, Grant Hendry, had this to say:
It clearly remains challenging times for landlords but they are maintaining the profitability of their portfolios, yields continue to rise, plus there remains strong tenant demand against a backdrop of relatively low supply and higher population numbers seeking housing.
Advisers can clearly play a vital and pivotal role for them, and our survey numbers suggest there are still a significant number of landlords who are not using the services of an adviser, and therefore missing out on a raft of product options, not forgetting the protection that comes with advice.
If you are a landlord looking for help with funding your property, whether that is buy to let or commercial, our team of advisors can help. Call free on the number above, or enquire online.
