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  • Writer's pictureRicky Gandhi

A Quarter of a Million Buy-to-Let Landlords Face Remortgage Crisis

Updated: Jun 27, 2023

Table of contents


  • Introduction

  • What is the buy-to-let remortgage crisis?

  • Impact on landlords

  • Solutions for landlords

  • Possible Implications for the rental market

  • Expert opinion

  • Conclusion



Introduction


Meet the remortgage crisis that is causing chaos for a quarter of a million buy-to-let landlords! For those unaware, remortgage is the process of transferring a mortgage from one lender to another, hopefully at a cheaper rate. But with interest rates on the rise, landlords are struggling to secure favorable rates, leading to a surge in monthly repayments and a decrease in rental yield. So how many landlords are affected, you may ask? More than 250,000. That's a lot of people in financial turmoil! In this blog, we'll delve deeper into the crisis, exploring the impact on landlords, potential solutions, implications for the rental market, and expert opinions. Let's hope for a happy ending!


Buy-to-let



What is the buy-to-let remortgage crisis?


If you're a buy-to-let landlord, you may have heard about the remortgage crisis that's been making headlines. But what exactly is it? In simple terms, a buy-to-let mortgage is a loan that landlords take out to buy a property to rent out. Remortgaging is when they switch to a new mortgage deal at the end of their current one. This can be to get a better interest rate, a lower monthly repayment or to release equity from their property. The factors causing the remortgage crisis are complex, but some of the main ones include changes to tax rules and stricter lending criteria. These have made it difficult for landlords to obtain favorable interest rates or even qualify for a remortgage at all. But why is this such a big deal? For starters, it means that landlords could see a rise in their monthly repayments, which could impact their profits and ability to manage their portfolio. It could also lead to a breakdown in rental yield, which is the income generated by the property in relation to its value. So, what can landlords do about this crisis? Some solutions include switching to fixed-rate mortgages, extending the mortgage term, or exploring alternatives to remortgage altogether. While each option has its pros and cons, it's important for landlords to do their research and seek expert advice before making any decisions.


Impact on landlords


As the buy-to-let remortgage crisis continues to loom over landlords, many are finding it increasingly difficult to obtain favorable interest rates. With a rise in monthly repayments, there has been a significant breakdown in rental yield for many landlords. The impact of these challenges is especially difficult for landlords with a portfolio of properties. With each mortgage renewal, there is an uncertain future and a squeeze on cash flow. Without proper planning, many landlords may have to sell their properties to offset costs or face the harsh reality of foreclosure. One solution for landlords is to consider switching to fixed-rate mortgages, which offer the benefit of locked-in rates. Extending the mortgage term is another option that may help in reducing monthly repayments. Alternatively, landlords can explore other alternatives to remortgaging such as equity release or bridging loans. In essence, landlords need to be strategic in their approach to the remortgage crisis. It is vital that they weigh their options carefully and consult a financial advisor to understand the implications of each decision made.



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Solutions for landlords


So, you're a landlord facing a remortgage crisis. Don't worry; you're not alone. Here are some options to consider: Switching to fixed-rate mortgages is a good option if you want stability and certainty. You can lock in a rate that works for you, and not worry about any future rate increases. This may limit your flexibility, but it could also give you greater control over your finances in the long run. Extending the mortgage term can help you spread out payments over time, reducing your monthly repayments. This may also lower your interest rates and give you the freedom to adjust your budget accordingly. However, you will end up paying more overall due to the extended term. If these options don't work for you, consider refinancing or finding alternative sources of finance. Consult your financial advisor or mortgage broker to discuss which options are best for you.


Possible Implications for the rental market


With a quarter of a million buy-to-let landlords facing a remortgage crisis, the rental market could see some serious consequences. As landlords struggle to obtain favorable interest rates and face increased monthly repayments, the supply of rental properties could decrease. This could ultimately lead to an increase in rent prices, impacting the already worrying housing crisis. It's a vicious cycle that could have far-reaching implications. But don't worry - in the next section, we'll explore some possible solutions for landlords in this situation.


Expert opinion


Industry professionals suggest that landlords should start planning ahead by conducting regular reviews of their current mortgages and exploring the range of options available. This includes switching to a fixed-rate mortgage, extending the mortgage term or seeking alternative options. It is important to consider the financial impact on rental yields and to maintain open communication with tenants about changes in monthly repayments. Preparation and proactive action are key in navigating through this remortgage crisis.


Conclusion


The remortgage crisis has left over a quarter of a million buy-to-let landlords in a difficult financial situation. The difficulty in obtaining a favorable interest rate, increase in monthly repayments, and breakdown of rental yield has impacted landlords significantly. Switching to fixed-rate mortgages, extending the mortgage term, and exploring alternatives to remortgaging are some solutions for landlords. However, the crisis could result in reduced supply, an increase in rent prices, and an impact on the housing crisis. Industry professionals advise landlords to prepare for the crisis. Overall, the remortgage crisis highlights the importance of being aware of the potential risks and taking proactive measures.


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