Mortgage Applications Driven by Bountiful Buy-To-Let Surge

A record-breaking surge in buy-to-let companies is driving new mortgage applications. 

A flood of buy-to-let companies were set up in 2021 – with half of new buy-to-let mortgages taken out by a firm rather than by individual landlords. 

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Hamptons the Home Experts UK have reported that 47,400 buy-to-let companies started in 2021, with most of them in London and the South East. Companies House data also shows that 61% of the 269,300 current companies have been incorporated since April 2017, when it was announced that investors with properties in their personal names would no longer be able to claim mortgage interest as an expense.

What is pushing these buy-to-let mortgage applications? 

Demand for homes remains higher than the amount of stock available as fierce competition across the UK’s rental sector continues to push rental prices up. 

The pandemic could be a contributing factor to the change in supply and demand, but Paragon Bank believes the government should step in to make the market more appealing to private investors to prevent supply from falling further. 

A recent report from Shawbrook Bank shows that 34% of landlords are optimistic and plan to buy at least one more property in 2022 – with many likely to use borrowing to add to their portfolios, stating that it’s worth investing in the next 12 months. 

Paragon Bank also pointed out another significant factor that could be boosting buy-to-let mortgages is the five-year anniversary of the Prudential Regulation Authority’s updated underwriting standards. 

The rules were brought into place in 2017, meaning many property investors chose to lock into longer term deals – many of which are coming to the end of their term. The new standard requires lenders to take a more holistic approach at looking at the wider picture of assessing mortgage affordability

It’s also been found that:

  • Buy-To-Let companies currently hold 583,000 mortgaged properties
  • This accounts for about 29% of all existing buy-to-let mortgages nationally
  • This is up from 26% a year ago 

Aneisha Beveridge, Head of Research at Hamptons International, says that despite record numbers of rental homes being held in companies, the growth in buy-to-let businesses has come from smaller landlords rather than larger institutions:

Only 20% of Buy-To-Let businesses hold more than three mortgaged properties, a similar profile to landlords who hold homes in their personal name.

Beveridge adds that the number of new Buy-To-Let incorporations in 2021 were probably close to its peak, with fewer likely to be set up in 2022.

Will going green increase the buy-to-let mortgage market?

Another prediction set for 2022 is the increase of potential green offerings for landlords. Lenders like Paragon Bank are following suit and hope others will too, increasing their green mortgages specifically for the buy-to-let mortgage space. 

As noted by The Guardian, ‘green mortgages’ reward someone for buying an energy-efficient home by offering them more favourable terms than those that come as standard. At the moment, it could mean either getting a slightly lower interest rate, a cashback when taking out the mortgage, or both.

Upgrading energy efficiency in the private rental sector can seem like a difficult change but is also a necessary one in the progression of greener energy. 

Whether you’re looking to expand your portfolio or just simply would like to learn more, you can book a call for a free market scan with our advisor to get a better deal on how you can reduce your current mortgage payments. Or use our free mortgage calculator here to learn how you can reduce your mortgage payments. 

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