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To answer that first question, it’ s important to provide a bit of context. While PTs have been popular for a while, they started to become the best option for many landlords around the time that the Bank of England started raising rates three years ago. They provide a low stress, low cost solution to secure a competitive rate.
In the third quarter of 2024, 63 % of refinance lending by value were PT cases – and in the past, that number was even higher, according to data from UK Finance. Go back to the second quarter of 2023 and PTs account for 73 % of all refinance lending.
This data showcases how product transfers have become such an important feature of the entire refinance market over the past few years and points towards PTs continuing to be.
So what are the benefits of a Product Transfer?
For Buy to Let borrowers, the benefits are both financial and practical. PTs eliminate many of the costs associated with remortgaging, such as reduced arrangement fees thus making them a very cost effective option. Unlike a full remortgage, a PT involves minimal paperwork and less underwriting which is great for landlords with time constraints or large portfolios.
Additionally, PTs allow landlords to lock in a competitive new rate before their existing deal expires and reverts to the SVR, protecting their cash flow. Staying with the same lender simplifies ongoing management, especially for landlords with multiple mortgages.
Advisers play a critical role in both advising and helping landlords navigate their refinancing options. The volume of BTL borrowers coming off fixed rate deals next year is considerable. Some of the most recent estimates suggest that more than one in three Buy to Let loans are up for renewal in 2025.
This will mean that landlords will have no option but to re-engage with the market next year – and on considerably better terms than what would have been available a couple of years ago.
Of those lenders who do offer PTs for Buy to Let properties, very few offer a PT with additional borrowing which Keystone made available to all eligible borrowers...
The big question is, what will they do?
There’ s no doubt that PTs will remain a highly popular option and will probably continue to account for more than 50 % of the refinance market.
Many landlords have fixed rates taken in 2020 which are coming to an end and the subject properties will have experienced capital growth. Therefore, a large number of these landlords will want to release some of that equity in order to expand their portfolios.
Expansion is less attractive in a higher rate environment and most lenders offer PTs on a pound-for-pound basis only. In fact, some specialist BTL lenders are still not able to offer PTs to their borrowers.
Of those lenders who do offer PTs for Buy to Let properties, very few offer a PT with additional borrowing, which Keystone made available to all eligible borrowers from April 2024.
This allows the borrower to enjoy the simplicity of a PT whilst also raising additional capital which could be used to improve or renovate the property, improve the EPC rating or expand their portfolio.
Should the level of remortgage lending increase – and I’ m confident it will – 2025 should be a more prosperous year for the adviser community.
Of course, headwinds remain within the market, but with the increase of loans coming to an end, advisers will be busier next year.
PREDICTING THE FUTURE
Trying to predict the future has become an impossible task, but realistically the Buy to Let market should expect to reach in excess of £ 39bn of lending next year. Much depends on interest rates and landlord confidence, of course. But if the Bank Base Rate reduces to around 3.75 – 4 % next year, which is possible, it will lead to a significant uplift in activity.
After the past two to three years, that’ s something to be welcomed.
To find out more, visit the website and locate your regional BDM in the About Us tab, or call 0345 148 9086 soon.
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