Last week we outlined some of the activity we expect to see across the commercial mortgage market in 2021. Today we’d like to highlight another interesting trend that buy-to-let mortgage brokers are anticipating this year.
What is the predicted trend? A jump in remortgage business prompted by the five-year anniversary of the stamp duty surcharge rolling around. For context, the additional 3% stamp duty connected to second home and investment property purchase was first introduced in April 2016. In the six months prior to its introduction, Paragon Bank reported that five year fixed rate mortgage volumes were 121% higher than the same period the previous year as investors looked to take advantage of the market and buy before the additional 3% took effect.
How does this affect today’s market? The mortgages taken out during this period are now all coming to the end of the initial fixed rate period. It’s also worth noting that over the last five years, property and rental values have increased. The result of both of these conditions is a strong market opportunity for remortgages, enabling landlords to release the capital gains they have made by taking out additional borrowing. Why might they do this? Releasing capital gains through remortgaging is beneficial from a tax perspective for the following reasons:
- it doesn’t create a tax chargeable event, meaning no income tax, capital gains tax or corporation tax is immediately payable
- it can increase the landlord’s own net return on investment
So if you have clients who have purchased a buy-to-let property before the change in stamp duty policy five years ago, now is the time to remind them to review their borrowing if they haven’t already. A group of experienced financial professionals made up of ex underwriters and commercial mortgage and property specialists, the Swoop team will be able to check your client’s eligibility, discuss their options and provide support and guidance throughout the entire process to ensure they secure the right commercial mortgage option for their business.
And if you’re a business owner who would like to discuss your options with an expert in this area, we’ll also be able to help. Simply sign-in or register to get started and speak to the team at Swoop.