Professional landlords still powering BTL borrowing

Professional landlords remain the engine behind buy to let borrowing and mortgage advice activity, although sentiment has dipped as regulatory pressure builds, research suggests.

Foundation Home Loans’ latest Landlord Trends study indicates experienced operators continue to refinance, raise capital and restructure debt.

That’s despite growing unease over how the Renters’ Rights Act will affect day to day lettings.

The survey found one in three had arranged new finance, refinancing or a product transfer within the past year.

Landlords still borrowing

Foundation’s director of sales, Grant Hendry, said: “While confidence has softened slightly, the underlying behaviour of professional landlords remains very clear.

“They’re still borrowing, refinancing and seeking advice in significant numbers, and they’re doing so earlier and more carefully than before.”

He added: “This is not a market stepping away from the PRS, or buy to let, or the finance needs required in this space, but it is one that is becoming more selective and more reliant on experience and support.

“Concerns around possession, court delays and future regulation are clearly shaping landlord behaviour, particularly for smaller operators.”

Growing reliance on brokers

The survey shows that one in three landlords arranged fresh funding, refinanced existing debt or completed a product transfer over the past year.

That figure climbs to six in 10 among those already carrying buy to let borrowing.

Foundation says this highlights the growing reliance on brokers and specialist lenders as portfolios become more layered and finance structures more involved.

Leveraged landlords now hold 6.5 separate loans spanning more than two lending institutions.

Combined borrowing averages £714,000, while gearing remains relatively conservative at just under 50% loan to value.

Also, seven in 10 landlords used a broker for their latest mortgage, with most opening discussions at least three months before their current deal expired.

Incorporated landlords still buying

However, limited company and portfolio landlords were more active in refinancing, rent reviews and debt utilisation than individual investors.

They also showed far greater engagement with legislative reform.

Awareness of the Renters’ Rights Act has climbed sharply with three quarters of respondents saying they were familiar with the proposals.

That’s up 8% on the previous quarter multi-property and incorporated landlords being the most knowledgeable about the Act.

Around 75% believe the legislation will negatively affect their own lettings activity, while 84% expect wider damage across the private rented sector.

Landlords fear on repossessions

The biggest worry for landlord is over court capacity when seeking possession of a property.

That has now overtaken energy efficiency rules and tax exposure as the sector’s leading concern.

Many respondents said planned rent rises were now being weighed against the Act’s provisions.

Other rent rise factors include rising operating costs and fiscal burdens.

Most landlords turn a profit

Foundation says that 85% of landlords reported turning a profit, only slightly below the previous report.

Average yields registered 6.4%, easing from 6.6% but they are robust in historic terms.

Despite those yields, nearly half of landlords intend to sell at least one asset within 12 months, while just 5% expect to purchase.

The lender said these disposals reflect balance-sheet restructuring, with larger landlords still buying good opportunities.