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Landlords: is now the time to remortgage your buy-to-let properties?

Lenders offering cashback and fee-free deals for property investors

With lenders cutting interest rates and offering cashback on remortgaging deals, now could be a good time for landlords to consider refinancing their portfolios.

In the last month, several buy-to-let lenders have introduced new or improved remortgaging deals for landlords.

And with investors facing squeezes on their profits, many of these products focus on cutting the up-front costs of remortgaging or offering cashback.

Here, we take a look at the recent deals that have come on to the market and offer advice on remortgaging your buy-to-let portfolio.


New deals for buy-to-let landlords

TSB has this week become the latest lender to reduce the cost of its fixed-rate range for buy-to-let landlords looking to remortgage, with three- and five-year deals dropping by 0.3%.

This is the latest movement in a busy remortgaging market – specialist lenders Foundation Home Loans and Accord both recently cut their deals by 0.25%.

Elsewhere, Aldermore has launched a ‘multi-property’ remortgage product, allowing landlords to collectively remortgage multiple buy-to-let properties at the same time.

Landlords refinancing rather than expanding

With their profits increasingly coming under threat by taxation measures, there are signs that landlords are proactively refinancing their portfolios rather than adding to them.

Data from UK Finance released earlier this month shows that landlords remortgaged 14,700 properties in July, up 7.3% year-on-year.

This trend has been running throughout the year, with data from Paragon showing that remortgaging enquiries hit record levels in the first quarter of 2018, increasing by 29% year-on-year.

Lenders cutting up-front costs

The squeeze on buy-to-let investors means more lenders are focusing on cutting the up-front costs of remortgaging.

Buy-to-let mortgages have historically carried expensive upfront fees, but there are signs that this could be changing.

For example, when cutting the rates on its products, Foundation cited the need to offer ‘short-term incentive packages’ to landlords. This meant cashback on completion and no valuation fees.

Aldermore, meanwhile, is offering its new deals with no up-front product fees.

Fee-free remortgaging deals

While lenders seem to be moving towards cutting up-front costs, there’s still a long way to go before this becomes commonplace.

We analysed data from Moneyfacts, and found that of the 1,057 two- and five-year fixed-rate remortgage deals currently available to landlords, only one in five (21%) came without up-front fees.

These fees can be very expensive, too. While the highest up-front fees we found came to £2,499, many lenders routinely charged between £1,495-£1,995 as ‘arrangement’ or ‘completion’ fees.

The blue bar shows deals with fees; the red bar shows those without.

Cashback remortgaging deals

Some lenders are going a step further by offering cashback to landlords when they remortgage.

We found that 17% of two-year and 22% of five-year fixed-rate deals come with cashback – with the maximum amount on offer a cool £1,000.

Always do your research when considering cashback deals, as the money you’re given could be dwarfed by initial costs of setting up the deal and any legal fees.

The red bar shows deals paying cashback; the blue bar shows those without.

Fixed-rate buy-to-let remortgage deals

In the fixed-rate market, landlords currently have plenty of choice, with more than 1,000 products available.

Generally speaking, rates remain low, too. The table below shows the current average rates on buy-to-let remortgaging deals.

Number of products Average rate
Two-year fixes 516 2.90%
Five-year fixes 541 3.41%

The rate you’ll get depends on many factors, including the size of your portfolio (more on this later) and how heavily mortgaged it is.

In the tables below, we’ve shown the cheapest two- and five-year fixed-rate mortgage deals (at 75% loan-to-value ratio), based on the initial rate offered by the lender.

Remember that while initial rates can be attractive, you should always look at the overall cost of a deal before rushing in.

Two-year fixed-rate

Initial rate Revert rate APRC Max LTV Fees Cashback
TSB 1.69% 5.09% 4.7% 75% £1,995 £0
Post Office 1.69% 5.24% 4.8% 75% £1,495 £0
Sainsbury’s Bank 1.70% 5.24% 4.8% 75% £1,995 £0

Five-year fixed-rate

Initial rate Revert rate APRC Max LTV Fees Cashback
The Mortgage Works 2.44% 5.24% 4.4% 75% £1,995 £0
BM Solutions 2.46% 5.09% 4.3% 75% £1,995 £0
Accord 2.46% 4.99% 4.2% 75% £1,995 £0

Source: Moneyfacts. Accessed 25 September 2018.

Affordability rules for landlords

New rules introduced in October 2017 mean it’s now more difficult for landlords with heavily-mortgaged portfolios to refinance or raise additional capital.

These rules mean that landlords with four or more properties now have to meet tough lending criteria on each of their homes, rather than just show their top-line profits.

Many lenders now require landlords to show the rent on their properties will cover at least 145% of their mortgage payments, a figure in excess of the 125% previously used by many lenders.

This has resulted in some landlords looking to sell off properties from their portfolios.

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