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Do you expect to see less or more second charge mortgage lenders in 2018?

The Loans Engine: Bragging rights or mortgage prisoner?

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The Loans Engine: Bragging rights or mortgage prisoner?

By the time the economy crashed in 2008, many buy-to-let (BTL) landlords had already taken advantage of a surge in competitive tracker mortgages. So much so, in fact, that as the market plummeted and interest rates hit a historic low, thousands of UK borrowers were rewarded with mid-recession repayment margins of two per cent and lower.

Pegged at 0.5pc for more than five years, plans to raise the near-zero base rate have been stalled by low inflation and weak growth in the economy. Despite house prices and property transactions continuing to increase, each new bulletin from the Bank of England suggests a rate rise remains a distant prospect.

Home ownership seems a distant dream for many and the BTL sector looks likely to continue to flourish. Now proving to be one of the most popular and one of the most profitable sectors around, BTL is becoming the investment of choice for those looking to develop additional income, attracting an army of amateur landlords.

The question is, in the current climate, is a remortgage still a viable option for landlords who want to build a property portfolio without sacrificing their current BTL tracker deal?

According to a recent survey by BTL specialists Platinum Property Partners, 43 per cent of landlords are intending to grow their portfolio of rental properties in the coming months, with the demand for tenancies continuing to outstrip those looking to buy. However, though it seems the industry shows no signs of slowing, many landlords will need to unlock the equity from their existing properties to provide the deposit on the next addition to their portfolio.

For landlords wanting to release equity, the bragging rights earned by low repayments and increasing property prices are threatened by lenders refusing further advances in an attempt to shift landlords off low rate tracker deals and onto higher rate, more profitable remortgages. So, buying another rental property, at least for those landlords not offered further advances, can prove tricky, especially if they want to hold on to their preferred rates. Victims of their own success, some landlords have become mortgage prisoners.

The situation does, however, create new opportunities for brokers prepared to offer alternative routes to finance and generate new revenue streams for themselves. Looking for a way to keep that balance sheet ticking over? Keep your mind open to BTL clients reluctant to lose their low-rate tracker deals and, if you’re not considering second charge, think again. A BTL second charge mortgage allows your client to unlock their current equity to use as security on their next acquisition and, by retaining their existing tracker deal, the average funding cost means the landlord is better placed to sustain a positive margin on their portfolio.

It’s a clear win-win for both parties, so, why close yourself off to BTL opportunities when second charges could be creating more for you?

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