As conveyancers face potential reductions in workloads due to factors such as economic uncertainty; volumes of remortgage work remain high.
Towards the end of 2018, average buy-to-let mortgage payments were the lowest on record, with buy-to-let remortgaging at an all-time high.
However it may be that remortgaging work is coming at the cost of outright purchases by landlords with remortgaging recently accounting for 57% of all buy-to-let mortgage activity.
New Prudential Regulation Authority (PRA) guidelines attempt to restrict the amount landlords can borrow, looking for rental income to exceed mortgage payments by 45%.
As new business falters in response to government attempts to swing the balance in favour of first-time buyers rather than landlords, lenders are attempting to make their rates and application criteria attractive to the buy-to-let market.
Those who are unlikely to see a yield of 145% from their properties are taking advantage of the newly relaxed approach of some lenders. After an initial tightening in response to the PRA guidelines, some banks have reduced their mortgage income coverage ratios (ICR) from 145% to 125%, meaning that rental income will only need to exceed mortgage payments by 25%.
Five-year fixed rates remain attractive, although predicted interest rate rises suggest that sooner or later increases will be made. Add to this the government’s measures to slow the buy-to-let market, including tax relief changes and the Stamp Duty surcharge, and lenders may soon see a reduction in applications for buy-to-let mortgages.
As landlords spend time now in putting the best possible finance in place for the next few years and the PRA seeks to raise lending criteria, a slowdown seems likely, both in the purchase and remortgage markets.
