There is no denying that Brexit has had an enormous effect on the housing market, with property experts predicting as much as a 35% fall in pre-Brexit property prices. Currently, landlords are sitting tight on their existing portfolios, as higher costs of running a buy to let have seen landlords take a dip in their profits. But all is not lost. Lenders can take matters into their own hands and encourage landlords to take up further lending products.
Cashback Product Eases Up Cashflow
A burning issue for any landlord looking to increase their portfolio is the initial cash outlay just to get the property registered in their name. Surcharges, taxes, levies, and other fees quickly add up, leaving the landlord cash strapped and unable to make changes to the property in order to leverage a higher rental income. This means that get caught in a cycle where the lower rent causes the landlord to remain in this position, as property upgrades will be on the backburner. The rental will possibly only cover the monthly mortgage repayment, if at all. For landlords, emergency maintenance and repairs could leave them out of pocket very easily.
Lenders are feeling the pinch as landlords refrain from purchasing properties. A way for them to regain some of the marketshare, is by providing said landlords with a products that will ease up cash flow and certain lenders have decided a cashback solution will ease the pinch slightly. This form of encouragement will undoubtedly be well met by landlords.
Softer Rates Cushion The Blow
Property investors have another hurdle to overcome, and that is the possibility of interest rate increases as the economy tries to stabilize again. Once again lenders will have to pull out all the stops and some have gone as far as providing these landlords with the opportunity to refinance their properties. Not only will they benefit from the lowered interest rates, they will also have the opportunity to fix their rates for up to five years. This will allow them to manage their portfolio of assets a little easier as there won’t be any pricing surprises on their mortgages.
Lower Deposits To Increase Applications
One of the biggest obstacles in property investments is the ability to come up with the downpayment. Some institutions can request up to 35% of the value of the loan as a downpayment in order to mitigate their risk. For investors, this is a major obstacle considering all the costs involved in the purchase of a property. Some lenders are addressing this hurdle by providing their clients with up to 80% loan-to-value products should they meet the requirements.
For investors, the cashback option is perhaps the most surprising product of the lot as it means direct cash back in their pockets. For those who know what it takes to manage a property, this is worth its weight in gold. Lenders are doing their bit to reduce the burden on landlords.
Author: Sandy Kenrick
Sandy Kenrick swapped a fast-paced career as business banker for the insurance industry. Long hours and a new family quickly led her to look beyond the world of finance. As a work from home mom, Sandy now gets to do what she loves. Much of her work still involves finance and business, but when that mid-afternoon sun swings around it’s time to switch off the laptop, pour a glass of wine, and enjoy her growing family.