Landlords are spotting opportunities in the market and remortgaging their existing properties in order to fund further purchases.
According to the Council of Mortgage Lenders, remortgaging accounted for over two thirds of the 21 per cent increase in buy-to-let gross advances between the first and second quarters.
Paragon Mortgages’ intermediary survey showed capital raising was the number one reason for landlords remortgaging during the second quarter. On average, nearly five out of ten (47 per cent) buy-to-let remortgages handled by intermediaries surveyed were for the purpose of raising capital, whilst three out of 10 (35 per cent) were to achieve a better rate of interest. Other reasons for remortgaging included landlords’ existing lenders actively encouraging remortgaging (eight per cent) and dissatisfaction with an existing lender (seven per cent).
Remortgaging hit its highest level since the final quarter of 2008 during the second quarter, according to the CML’s figures. The £1.86 billion advanced for remortgage purposes represented 53 per cent of the total £3.5 billion buy-to-let lending for the period.
John Heron, Paragon Mortgages’ managing director, said: “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 per cent, so there is a huge amount of equity in the sector that landlords are looking to utilise to help fund portfolio growth.
“Council of Mortgage Lenders 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.”
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