Landlords adopt strategies to manage higher costs – research

Advisers' role in guiding landlords in competitive market highlighted

Landlords adopt strategies to manage higher costs – research

To cope with the rising costs of managing rental properties, a significant number of buy-to-let landlords have implemented financial changes over the last 18 months, a new study has found.

According to the Q1 2024 Landlord Trends report by Pegasus Insight for Foundation Home Loans, 30% of landlords have renegotiated mortgages with their current lenders, 29% have increased rents, and 25% have halted plans to acquire additional properties.

The report, which includes responses from 774 landlords surveyed between March and April 2024, also revealed that 22% of landlords remortgaged with a new lender, 15% covered part of their mortgage payments using non-rental income, and another 15% sold properties to reduce mortgage costs.

To further reduce expenses, 17% of landlords are now managing properties on their own, moving away from professional letting agents, with 8% completely switching to self-management.

Over 40% of landlords intend to remortgage or opt for a product transfer within the year. This includes 49% who need to refinance one mortgage, while a smaller portion, 9%, indicated they have more than five mortgages due for refinancing.

Almost seven in 10 landlords (68%) have arranged their latest mortgages through advisers, particularly those managing larger portfolios. This compares to 26% who dealt directly with lenders, 3% who used online brokers or robo-advisers, and 1% who employed comparison websites.

For future acquisitions, 48% of landlords plan to use buy-to-let mortgages, 38% will buy outright, and another 38% will release equity from existing properties. Additionally, 15% intend to draw from pension funds.

“Understandably, landlords have been using all options at their disposal when it comes to mitigating the increase in mortgage costs they have seen as a result of higher rates,” said Grant Hendry (pictured), director of sales at Foundation Home Loans. “There is clearly a ‘needs must’ approach to dealing with this issue.

“While we have seen rates come down off their 2023 highs, there will still be large numbers of landlords who are coming to the end of their current deals, and are looking for solutions in order to keep down any mortgage-cost increases.”

Hendry also highlighted the critical role of advisers in navigating these choices to maximise benefits for landlords amid a competitive market.

“As noted in the survey, there is a lot of maturity business coming to the table in 2024, and advice will be crucial for these landlord borrowers so they get the most positive outcome, plus a number of landlords want to add to portfolios, and there will be no stakeholder in the market who doesn’t welcome greater levels of purchase activity,” he said.

“It clearly remains challenging times for landlords, but they are maintaining the profitability of their portfolios, yields continue to rise, plus there remains strong tenant demand against a backdrop of relatively low supply and higher population numbers seeking housing.

“Advisers can clearly play a vital and pivotal role for them, and our survey numbers suggest there are still a significant number of landlords who are not using the services of an adviser, and therefore missing out on a raft of product options, not forgetting the protection that comes with advice.”

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