The increase in portfolio and complex buy-to-let business seen over the past two years is set to continue in 2020, according to Paragon.
With landlords looking for more efficient ways to structure their businesses, there has been an increase in demand for incorporated and limited liability partnership mortgage products.
In fact, research from BVA BDRC for Q3 2019 reveals the number of landlords expecting to purchase property in a limited company structure has almost doubled in under two years.
Paragon predicts those who do purchase are more likely to be larger-scale portfolio landlords, with non-portfolio landlords owning fewer than four properties far less likely to expand since the introduction of the stamp duty surcharge in April 2016 and subsequent tax changes.
Additionally, recent research from the bank found larger-scale landlords are three times (11%) more likely to consider buying than smaller scale landlords (4%) within an overall much smaller buy-to-let market.
Despite a constrained buy-to-let market, the private rented sector (PRS) continues to provide a home for one in five households, according to the 2017/18 English Housing Survey, and the demand for PRS property will continue to grow.
This, alongside the Prudential Regulation Authority’s (PRA) underwriting approach for portfolio landlords, has resulted in specialist lenders (including Paragon) tailoring products to meet more complex requirements.
Following the ban on letting fees to the proposed abolition of ‘no-fault’ eviction, Paragon believes 2020 will see the introduction of more tenant-friendly regulation.
Moray Hulme, director of mortgage sales at Paragon, comments: “In recent years, landlords have had to be more strategic in their approach than ever before and the buy-to-let market has seen a significant increase in portfolio and complex business.”
“Whilst mainstream lenders have limited their involvement to smaller-scale landlords, Paragon and other specialist lenders have been able to adapt and offer the right products to enable landlords to remain efficient – and this is a trend that we expect to continue in the long-term.”
He says this year, we will start to notice fewer opportunities for remortgage business as a result of landlords having opted for stability with long-term fixed rate products during a ‘turbulent few years’ in the buy-to-let market.
Hulme advises intermediaries looking for growth in buy-to-let to refocus back on house purchase.
“We also expect to see more tenant-friendly regulation in 2020, as the PRS continues to support a housing crisis caused by multiple factors, including population growth, limited investment in social housing, and tighter mortgage affordability,” he adds.