Landlord borrowers are going it alone

Originally published by The Intermediary

There’s always a lot of noise around the buy-to-let market – regulation, taxation, costs, the Renters’ Rights Bill, etc – but look beyond this as advisers because, certainly within our latest Pegasus Insight Landlord Trends research, there appears to be plenty to data to support a growing number of landlord borrower opportunities that can be acted on immediately.  

For me, one statistic stands out above all others: more than a quarter of landlords with buy-to-let borrowing went direct to a lender for their most recent mortgage. 20% of them did this without any advice at all. 

That’s not a marginal figure. In a market where margins matter and rates are moving, this represents a substantial population of landlords who may not be on the most suitable deal, may be paying more than they need to, and may not have the right product structure for their long-term investment plans. For advisers, it’s an open invitation to start a conversation. 

And the timing could hardly be better. Product rates have been falling in recent months, with lenders competing harder for business and broadening their criteria. The choice of products is improving too.  

At Fleet, we’ve recently launched our 55% LTV range, complementing our established portfolio and limited company offerings, as well as mortgages for HMOs and MUFBs, and we’ve made changes right across our range to provide more competitive rates and flexibility. 

When you put the current product environment together with the behaviour we’re seeing in the landlord population, the opportunity for advisers is clear.  

Six in ten leveraged landlords have had a fixed-rate end in the last two years. Over two-thirds of them stayed with their existing lender, and of those doing a product transfer, 43% went direct. That means they were probably not presented with any alternative from what’s available across the market, certainly not by an advisers, and may not know what else could work better for them. 

Looking ahead, 40% of landlords with borrowing intend to refinance in the next 12 months, with an average of 2.4 loans each. Among portfolio landlords with four or more mortgages, that figure rises to 53%, refinancing an average of three loans.  

That’s a significant pipeline of refinance business for those advisers who are proactive in identifying and engaging clients before they roll onto a reversionary rate or accept whatever their lender offers. 

The research also shines a light on the limited company sector. One in five leveraged landlords already has a mortgage on a property held in a limited company, and 81% of landlords with at least one limited company property have borrowing.  

Yet 72% of these landlords said they didn’t know which lenders were active in the limited company space. That lack of awareness is an opening for advisers to add value, particularly as 63% of those planning to buy in the next year intend to purchase via a limited company structure. 

And while the purchase market is more muted with just 6% of landlords overall planning to buy, those that have such intentions are overwhelmingly reliant on mortgage funding, with 60% using a mortgage to at least part-fund the purchase.  

For the right client, lower rates, greater choice, and targeted product innovation can make the numbers work for acquisitions that might have been shelved last year. 

Another detail worth noting is the debt profile of today’s landlord. The average leveraged landlord owes £673,000, with an average LTV of around 49%.  

Many are paying significant sums in annual mortgage interest – £22,000 on average, or £40,000 for portfolio landlords – which means even modest improvements in rate or structure can translate into substantial cashflow gains. That’s a compelling case for an advisory review and a conversation about refinancing, especially in a falling rate environment. 

What’s also interesting is how landlords choose their lender when rate isn’t the deciding factor. Across the board, minimal fees, overpayment flexibility, and service quality and speed are top priorities.  

This clearly plays to the strengths of advisers who can match clients to products that not only offer a competitive rate but also meet their operational needs, whether that’s freeing up cashflow, enabling earlier repayment, or ensuring fast execution on a purchase. 

The buy-to-let market will always have its challenges, but right now, advisers are in a strong position to demonstrate their worth. Rates are better, product choice is improving, and the data shows a high level of unadvised borrowing activity.  

For every landlord who has gone direct in the past, there’s an opportunity to show them the benefits of full-market advice and tailored product selection. 

If you’ve been looking for a positive in the current environment, this is it. The unadvised landlord borrower is a significant growth opportunity, and the conditions are right to act now.