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Wednesday, October 16, 2019

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Higher tax costs could lead to decline in BTL remortgages

Sam Monk | 16:50 Tuesday 9th April 2019

Landlord action to mitigate higher tax costs will lead to a lower level of BTL remortgage transactions in the future, according to new research.

Paragon’s PRS Trends Report for Q1 2019 has revealed that landlords were now prioritising measures to bolster financial strength over portfolio expansion.

Highlights from the survey include:

  • the proportion of landlords looking to purchase property has fallen from between 15–20% in 2015 to just 7–10%
  • average portfolio gearing has fallen from 40% in 2014 to 33%, with landlords who have three or more properties borrowing 36% of their portfolio value on average
  • mortgage costs as a proportion of rental income were down from the 30% recorded at the beginning of 2017 to 27%
  • BTL house purchase transactions in 2018 were down by 34% compared with 2014, while remortgage transactions were up 76% over the same period
     

John Heron, director of mortgages at Paragon (pictured above), said: “The shift in focus from portfolio expansion to financial strength has driven a surge in BTL remortgaging, with lower interest rates and longer initial fixed periods helping landlords [to] reduce finance costs and lock in greater certainty.

“However, it also extends the product maturity cycle, guaranteeing a reduction in the scale of opportunity to refinance buy-to-let mortgage deals over the next few years.”

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