Product transfers could be landlords’ only option in 2018

Michael Lloyd

January 12, 2018

Like-for-like product transfers will be the only option for a number of buy-to-let investors looking to remortgage this year, managing director of Enterprise Finance Harry Landy has predicted.

A number of buy-to-let lenders now stress test mortgages against an income coverage ratio of 145% with an interest rate of 5.5% after the Bank of England started regulating the sector last year.

This, for a number of landlords, makes qualifying for a new mortgage with fresh terms more demanding than in previous years.

Harry Landy said: “There will be lots of remortgage activity this year and most of it will be picked up by product transfers.

“Because of the changes in terms of rental income calculations, I think some investors’ only option will be a like-for-like product transfer with their current lender.”

He expects the second charge market to grow steadily this year, owing to a greater awareness of what’s available, better products and cheaper rates.

Meanwhile Landy reported seeing more property developers and landlords using bridging finance regularly, and expects this market to grow from £5bn to between £5.5bn and £5.75bn this year.

He said: “There are a lot of property developer finance lenders out there that will lend you but only want to lend you £5 or £10m as a minimum and there are much smaller ones who only want to lend you £500,000.

“We’re starting to work in that gap in the market, the £1-5m space where we can either use bridging finance or development finance to help people meet their development requirements.”

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