Buy-to-let remortgaging activity hits two-year low

The proportion of landlords remortgaging their investment properties has fallen to its lowest level for over two years, research from Paragon Mortgages has revealed.

Paragon Mortgages’ Financial Adviser Confidence Tracker (FACT) Index, a panel-based survey of mortgage brokers, found that only 39% of landlords obtained a buy-to-let mortgage via a financial adviser for remortgage purposes in Q3 2009. This was the lowest level recorded since Q1 2007.

John Heron, managing director of Paragon Mortgages, said landlords are not remortgaging and are happy to stay with their existing lender.

He added: “They are not remortgaging because of the low number of mortgages available. There is little incentive to do so because the reversion rates when coming off an introductory deal are so attractive due to the low Bank of England Base Rate and LIBOR.”

In contrast, the proportion of landlords obtaining buy-to-let mortgages for portfolio expansion purposes hit its highest level since 2001. The index found that 48% of landlords obtained a mortgage to extend their portfolio in Q3 2009 which is a rapid recovery from Q4 2008, when just 31% of landlords took out a buy-to-let mortgage for portfolio expansion purposes.

Only 10% of business via financial advisers surveyed was conducted by first-time landlords. This was the joint lowest level on record. The proportion of buy-to-let mortgages taken out by first-time landlords has decreased steadily over the decade, falling from 42% in the fourth quarter of 2001 to its current level.

Heron said it was encouraging that landlords are adding to their portfolios. However, he added: “Product availability in the buy-to-let market remains low, with only two lenders writing any significant levels of new business. Therefore, it is too early to start talking about the recovery of the sector because investors continue to suffer from a severe lack of competition in the mortgage market.”