Individual buy-to-let borrowers should remortgage for the long term right now, while pricing and LTVs are still good
Much has been made of the potential boost August’s Bank base rate cut offers the remortgage market. One would certainly anticipate an increase in borrower interest here but a competitive pricing environment is not solely the preserve of the residential sector.
Indeed, while pricing in buy-to-let tends not to be reliant on changes to Bank rate, sharper action is taking place regardless. There is, however, a fundamental difference that both advisers and borrowers need to get their head around: when it comes to buy-to-let mortgage accessibility at good LTVs with keen pricing, this is a trend living on borrowed time.
According to the latest data, average pricing for most products has been heading south. Mortgage Brain recently revealed the cost of an average two-year fix (at 70 per cent LTV) to be 6 per cent cheaper than in March, while a five-year 70 per cent LTV fix is 8 per cent cheaper.
The problem for landlords is that inactivity could cost them. The Prudential Regulation Authority is due to publish its follow-up document on buy-to-let underwriting (CP11/16) soon, which is likely to introduce significant curbs for buy-to-let lenders. Individual buy-to-let borrowers will find a very different environment when these measures are introduced, particularly in terms of the maximum LTVs available. Pricing may also face stark changes, although we wait to see on this.
The message for advisers, then, is that now is a good opportunity for individual buy-to-let borrowers to remortgage. We know many are using corporate vehicles for new purchases but are keeping existing properties in their own name. As such, it is the right time to remortgage at the required LTV for the long term.
At these rates and at these maximum LTVs, they may not get the chance again.
Richard Adams is managing director of Stonebridge Group