Helping Your Landlord Clients Get The Best From Their Buy To Let Investment

7th Jul 2022

Nowadays, the headlines in the financial sections of newspapers can be frightening. Since December, the Bank of England has raised the base rate five times, while fuel prices and the cost of living have risen dramatically. You could be forgiven for being concerned about how you can help your buy to let landlords, especially if they have a portfolio of properties.

However, as is frequently the case, headlines only tell half of the story – and usually the most negative half. As a result, before making any decisions, take a step back and consider the larger context. The Bank of England, for example, may have raised the Base Rate from 0.10 percent to 1.25 percent in a matter of months, but we remain in a historically low interest rate environment. Only 20 years ago, the Base Rate was 4%, and 30 years ago, it was higher than 10%.

Of course, the rate they pay on a buy-to-let mortgage is influenced by more than just the underlying Base Rate. The level of competition among lenders vying for your business influences how aggressively they price their products.

According to Moneyfacts data, landlords and investors now have access to over 3,500 mortgage products. This is not only the highest number seen since Moneyfacts records began, but it also represents nearly 1,000 more deals than were available prior to the pandemic in January 2020, and Moneyfacts reports that the number is still rising.

The ongoing dynamic of demand for rental property exceeding supply is the final piece of the puzzle that should reassure landlords. According to the most recent Zoopla UK Rental Market report, rental demand increased by 76% in January compared to similar periods from 2018 to 2021. According to the report, annual rental growth in the UK for new lets increased by 8.3 percent in Q4 2021 as demand increased amid a “chronic shortage of supply.” And rents in London rose even faster, by 10.3 percent year on year. Overall, Zoopla says that cumulative rental growth is 12% over the last five years, which includes the difficult period during the height of the pandemic. This is slightly under the rise in average hourly earnings over the same period, which means that while rents are increasing, they remain affordable for most tenants.

So, there is no need to panic about there being less buy-to-let investment, but in a rising-rate environment, your clients cannot afford to rest on their laurels either. It is critical that your clients pay close attention to the mortgages on their properties to ensure that they are not paying too much. In this environment, inaction is frequently punished by having to pay higher rates.

As an industry we should be recommending that clients take steps to prepare ahead of time. Many buy to let mortgages will reach the end of their initial deal period in the coming months, and if your clients have one of these, they should start thinking about remortgaging at least six months before the deal expires. Around this time, they may receive a letter from their lender offering a product transfer, and it can be tempting for them to accept the offer. Reminding them to keep in mind that there is no guarantee that the rate offered by their current lender is the best rate available in the market. And to take advantage of the opportunity to speak with a specialist buy to let broker who can research all their options across the thousands of products that may be available to them to identify the best option for their circumstances.

Being well-prepared means that your clients can potentially access rates now before lenders increase their pricing in the future, even if your client’s current deal has not yet come to an end. Mortgage Offers from mainstream buy to let lenders are usually valid for six months, while offers from specialist lenders tend to be valid for three months.

Remember that as interest rates rise, lenders tend to re-price their products more frequently and often at short notice, so in addition to preparing to remortgage in advance, we also recommend that you do everything you can to make your clients as ‘document ready’ as possible. If they can quickly provide the documents required by a lender to support their application, the application is more likely to be processed quickly, which means you have a better chance of securing your rate before any further potential increases.

So, what documents should you be recommending your clients need to become document-ready for a buy to let remortgage? Here are some of the documents that are commonly requested by lenders:

Documents to obtain for the process:

• Tax Documents

You should have three tax documents each year.

• Tax Return (SA100)
• Tax year Overview
• Tax calculation (previously known as SA302)

• If you are employed, 3 months’ payslips and P60 and, if you are retired, your Pension P60
• Up to date property portfolio information
• 3 months rental bank statements
• Proof of address in the last 3 months
• ID (passport or driving license)
• EPC register check

• • You need to ensure that your property has a valid EPC, which can be checked on the government website.

By being prepared and making sure your clients have access to the documents required by lenders, you will give your clients the best possible chance of ensuring they are able to remortgage onto the best rate for their circumstances.