Mortgage Brokers Getting More Buy to Let Business

Improvements in the buy to let market are sometimes difficult to see. House prices go up one month and down the next. Rents rise continuously for several months only to decline a couple of months in a row.

Mortgage Brokers Getting More Buy to Let Business

Mortgage availability, however, is one of the more reliable indicators — it says that banks see enough promise in the market to justify the approval of more loans to buy to let investors. Banks do have access to more sources of economic information and analysis. So it is good to keep an eye on the trend of mortgage approvals.

In the absence of mortgage approval data, mortgage brokers can give a pretty good idea of how the market is moving. After all, brokers earn their living by helping borrowers access the right mortgage products that fit their needs. Brisk business for brokers would suggest that the primary buy to let market is on the rise since it is closely associated with the volume of mortgage approvals by lenders.

So the recent report released by Paragon Mortgages can be considered a cause for cheer. It tells us that buy to let mortgages are now accounting for a bigger share of mortgage brokers’ business.

Buy to let mortgages comprised only 17% of their business at the end of the third quarter (in September) 2020. That proportion has since grown to 21%, according to the report released at the end of February.

This provides a solid indication of a rise in the volume of mortgages approved for buy to let purposes. According to Paragon’s managing director, this growth in buy to let mortgage business coursed through brokers shows that “buy to let is clearly an important source of business for the broker community”.

That degree of importance is likely to increase, going forward. The Paragon head thinks one out of five (20%) households in the UK will be living in privately rented accommodations by 2019, which would mean a significant rise from the 14% level at the end of 2020. This holds the promise of significant growth for the buy to let sector.

Buy to let investors with plenty of experience in the business appeared to have an easier time getting mortgage approvals for their expansion plans, and they accounted for 45% of buy to let mortgages. Landlords who arranged for remortgages comprised a third, 34%, of transactions while first-time buy to let investors made up 18%.

Potential buyers still find it easier to purchase second-hand properties. Down payments required on such properties reach only 10%, and banks are willing to approve as much as 90% loan-to-value ratios for previously owned homes.

Conditions like these are particularly favourable to buy to let landlords seek to expand their portfolios. However, they should be ready to fork up the cash deposit while making sure they have enough reserves to cover unforeseen expenses such as repair costs or delayed rent payments for their current buy to let properties.

Leave a Comment