One of the highest profile buy to let mortgage lenders predicts that 2020 will see increasing numbers of investors going into more diverse and complicated portfolios in order to improve their bottom lines.
The director of sales at Paragon, Moray Hulme, is warning that recent tax changes have forced landlords to look for more efficient ways to structure their business, driving an increase in demand for mortgage products for incorporated and limited liability partnerships.
Research conducted for the lender in the third quarter of this year reveals landlords expecting to purchase property in a limited company structure has almost doubled in under two years.
Paragon says this, alongside the Prudential Regulation Authority’s more detailed underwriting approach for portfolio landlords, has resulted in specialist lenders tailoring products to match more complex requirements.
It anticipates that its 2020 customers 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.
Recent research by Paragon found larger scale landlords are three times more likely to consider buying than smaller scale landlords within an overall much reduced buy to let market.
But it says notwithstanding such challenges the private rented sector continues to provide a home for one in five households and remains a successful business opportunity.
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, as PRS landlords play an increasingly vital role in meeting the UK’s housing need.
Hulme adds: “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.
“As we look ahead to 2020, we will start to notice fewer opportunities for remortgage business as a result of landlords having opted for stability with longer-term fixed rate products during a turbulent few years in the buy-to-let market. Intermediaries looking for growth in buy-to-let may want to refocus back on house purchase.
“We also expect to see more tenant-friendly regulation in 2020, as the private rented sector continues to support a housing crisis caused by multiple factors, including population growth, limited investment in social housing, and tighter mortgage affordability.”