Significant growth in number of portfolio landlords seeking to release equity as average value exceeds £2m

16 August 2021

New research into landlord intentions has revealed a significant increase in the number who intend to release equity from their existing portfolios as the value of an average ‘portfolio landlord’s’ properties – those with more than four buy-to-let mortgages - exceeds £2 million, with an average LTV of 56.2%.

The landlord research, conducted by BVA BDRC between the 20th June and the 5th July and comprised of answers from 753 ‘consumer’ and ‘portfolio’ landlords - shows that, of the 30% who say they intend to remortgage in the next 12 months, a third of those are doing so in order to release equity from their portfolios, with Foundation saying the likelihood is this released equity would be put towards further purchases.

The research also shows portfolio buy-to-let landlords are more likely to want to remortgage in the next 12 months – 43% - compared to their ‘consumer’ landlord counterparts – 20%.

The potential to add to portfolios, and the growing strength of the letting market, is shown in terms of larger landlords being typically more upbeat about the prospects for their own letting businesses.

Portfolio landlords – those with four or more buy-to-let mortgages – are significantly more upbeat (46% versus 35%) than consumer landlords – those with just one to three mortgaged properties, rising to 50% of landlords who own over 20 properties saying they felt either ‘good’ or ‘very good’ versus just 35% of single property landlords. Again, Foundation said this could be based on the recent growth in values and the extra equity in properties that landlords may feel they can now access in order to leverage.

In Q2 2021 the typical portfolio was worth around £1.25m (across all landlord types) and generating an annual gross rental income of £54k. Based on an average Q2 portfolio of 6.9 properties, the typical individual value of a property was £182,609.

Specifically for portfolio landlords with more than four mortgaged properties, average portfolio values recovered in Q2 to over £2m (£2,040,000) for the first time since Q3 of 2020.

The current average LTV ratio of a portfolio (of any size) is just 49.5%. Furthermore, 40% of all properties owned within an average portfolio are owned outright, with this presenting existing landlords with an opportunity to tap into equity levels which might have been recently boosted by increases in house values.

Foundation has recently launched a number of Limited Edition buy-to-let products specifically for portfolio landlords, including a recent ‘No fee’ product which is part of its F1 range, is offered at 3.39% up to 75% LTV, with no application fee, no product fee and comes with one free standard valuation, available for both purchases and remortgages. The product is available to both individuals and limited company portfolio landlords and has a maximum loan size of £750k.

Advisers and their portfolio landlord borrowers may also be able to take advantage of Foundation’s reduced document requirements when the portfolio is submitted at application stage. Additionally, there is no maximum portfolio size, subject to a maximum of £5m with Foundation.

George Gee, Commercial Director at Foundation Home Loans, said:

“We’ve seen the buy-to-let market moving steadily towards a greater level of professionalism for some years now, and this has meant a growing number of landlords are now defined as ‘portfolio’ operators and have long-term plans which involve making the most out of their properties.

“The research shows a number of key portfolio landlord intentions, particularly around extracting equity from their properties. Over the past year, in many areas of the country, we’ve seen double-digit house price growth, and even without access to the stamp duty holiday, the intention to remortgage to take out that increased value to purchase more has grown.

“It means advisers are likely to see a growing spike in buy-to-let remortgage advice demand, and the positive news is there are very competitive product options for all types of portfolio landlords at present. At Foundation we’ve focused recently on improving our offering to portfolio landlords, not just in terms of price, but also in terms of helping them cut back on upfront costs such as fees and looking at ways we can make the process to a mortgage as seamless as possible.

“Portfolio landlords are likely to grow in number in the months and years ahead, and as specialist lenders in this space, we will continue to develop the product options and flexible criteria to help them get the most out of their existing properties to expand their letting footprint.”

For more information on Foundation Home Loans, please visit: www.foundationforintermediaries.co.uk