Guide to BTL remortgaging in 2021: Fixed rate decisions
Jonathan Stinton is head of intermediary relationships at Coventry for intermediaries
Thousands of fixed rate mortgages will reach maturity this year, and many will be buy-to-let (BTL) landlords. This April marks five years since the 2016 stamp duty charges on second homes came into effect and a wave of landlords took out 5-year fixed rate mortgages at the time. It’s also set to see a spate of 2-year fixed rates maturing too.
This might not be their first rodeo in the mortgage market, but many of these BTL customers will be facing a very different situation to 2016 or 2019. The ongoing impact and uncertainty caused by the Coronavirus crisis will be at the front of their minds. Now more than ever they’ll need the guidance and support of intermediaries to make the right choices about their next mortgage.
In his third article on how intermediaries can support landlords, I will talk about what intermediaries can do to help their landlord clients make the right remortgaging decisions.
FAQ No. 3: “Coronavirus has created so much uncertainty and I can’t decide whether to take out a short or long-term fix – which is right for me?”
Pressures on income and rental payments, payment holidays and furlough will have all raised concerns amongst landlords about their opportunities to remortgage in the months ahead, and what product they should choose. After the stress and financial worry caused by coronavirus, and for those who have seen a spate of tax changes in the BTL market since 2016, many landlords will undoubtedly be seeking a hassle-free route to remortgaging and a great rate that keeps their costs low.
Yet, your landlord clients will want to know that the deal they’re securing now is also going to service them well in the years ahead. A 2-year fix may bring the lowest rate, and offers flexibility, but it might not offer longer-term stability over your customer’s repayments. On the other hand, a 5-year deal might give them the security they are seeking, but it does mean locking into a slightly higher rate for a longer time.
However, this doesn’t have to be a zero-sum game between short and long-term products. There are products on the market, such as Coventry for intermediaries’ Flexx-Fixed range which mean that your clients can lock into the security of a long-term deal, but without the early repayment charges that can make it harder to switch if their circumstances change.
This means that when a landlord comes to you and is concerned about losing the flexibility to switch by locking in for the longer-term, these flexible options could offer a new solution that gives them both the security and adaptability they’re seeking. These alternatives make fixing for longer a more practical choice for borrowers and they can be a powerful option in an intermediary’s toolkit.