The number of landlords looking to remortgage has reached an all-time high, Paragon’s latest Financial Adviser Confidence Tracking (FACT) Index has revealed.
The Index, which has been capturing the experiences and views of around 200 mortgage intermediaries on the development of the UK mortgage market each quarter since 1995, found in its latest survey that landlord remortgaging rose to 57% of all buy-to-let business in the third quarter of 2018.
The proportion of first-time landlord business, by contrast, dropped from 14% to 10%, while landlords looking for finance for portfolio expansion fell from 23% to 19% of the total.
Following the announcement of substantial tax changes for landlords in the Summer Budget in 2015, the proportion of landlords remortgaging outstripped those seeking funds for portfolio expansion for the first time.
Since 2015, remortgaging has continued to rise significantly. Currently, six out of 10 intermediaries say the main reason that landlords are remortgaging is to secure a better interest rate.
Overall, buy-to-let represented 19% of intermediary business in the third quarter, with the remainder taken up by mortgage applications from owner-occupiers.
“Landlords are investing less in the Private Rented Sector which, in time, is going to make it more difficult for tenants to find a property at a rent they can afford,” John Heron, managing director of mortgages at Paragon, said.
“This is clearly a response to the increase in costs that landlords face following changes to stamp duty and tax relief on finance costs.”
He added that, as a result, it was no surprise to see landlords taking the opportunity to reduce their mortgage finance costs as one part of their strategy to mitigate the impact of higher taxation.
“Tax bills due in January 2019 will include the first phase impact from the withdrawal of mortgage interest tax relief and landlords are preparing carefully for the next stages ahead,” Heron commented.