Capital raising behind surge in B2L remortgaging

Landlords raising capital to finance portfolio expansion are behind a rise in buy-to-let remortgage activity, according to Paragon Mortgages.

Paragon says that Council of Mortgage Lenders data shows remortgaging accounted for more than two thirds of a 21% increase in buy-to-let gross lending between Q1 and Q2 2011, and capital raising was the primary motivation for those remortgaging.

Research by the lender shows that 47% of buy-to-let remortgages handled by intermediaries were for the purpose of raising capital in Q2, while 35% were to achieve a better rate of interest.

A further 8% cited clients’ existing lender actively encouraging remortgaging, and 7% cited dissatisfaction with an existing lender.

John Heron, managing director at Paragon, says: “Approximately two thirds of properties in the private rented sector have no mortgage whilst the average loan-to-value on those properties with a mortgage is 48%, so there is a huge amount of equity in the sector that landlords are looking to utilise to help fund portfolio growth.  

“CML figures show there was a significant increase in buy-to-let remortgage cases between the first and second quarters of this year and it appears a large proportion of that is from landlords releasing equity to generate seed capital for portfolio expansion. In a market characterised by high rental demand, we could see this becoming more commonplace.”