Two-thirds of BTL loans are remortgages

Remortgaging accounts for two-thirds of the buy-to-let market due to record low mortgage rates, according to Mortgages for Business.

The firm’s latest Buy to Let index shows 66 per cent of ‘vanilla’ buy-to-let loans were remortgages in the first quarter of 2015, rising from 62 per cent in Q4 2014. The proportion for houses in multiple occupation was even higher, at 73 per cent, up from 70 per cent in the previous quarter.

For multi-unit freehold blocks, remortgaging accounted for 89 per cent of loans in Q1, compared to just 42 per cent in Q4 2014.

Mortgages for Business managing director David Whittaker says: “Record low mortgage rates are driving wave upon wave of landlords to reassess their finances. A great deal agreed last year may be uncompetitive by today’s standards.

“So this stampede is completely rational – it represents a charge by landlords to make the most of an unprecedented economic situation.”

The buy-to-let sector contrasts with the residential sector, where remortgaging accounted for 32 per cent of new advances in February, the Council of Mortgage Lenders’ latest figures show.

John Charcol senior technical manager Ray Boulger says: “In the buy-to-let market there is an added reason to remortgage that isn’t there in the residential market and that is extracting capital to expand your portfolio. Particularly people who have properties in London and the South-east, in the past three years they will have had more equity and therefore there is more reason to remortgage because, in my cases, that is the only way you can extract more capital.”

He adds: “Also, there will be a higher number of mortgage prisoners in the residential market.”

Average LTVs have also crept up in the past three months. For vanilla buy-to-let, the average LTV stood at 66 per cent at the end of Q1, compared to 63 per cent at the end of Q4 2014.

The Buy to Let index also shows the average LTV for HMOs rose to 70 per cent in Q1, from 64 per cent in Q4 2014.

Whittaker says: “Remortgaging is often done for the purposes of raising extra capital and this is reflected in higher LTV ratios. However, this is by no means an unwelcome trend – and could in turn open the door to more new purchases and investment by landlords.”