Significantly more portfolio landlords planning to release equity as average value exceeds £2m

Posted on Wednesday, August 25, 2021


"We’ve seen double-digit house price growth, and even without access to the stamp duty holiday, the intention to re-mortgage to take out that increased value to purchase more has grown."

New research has revealed a significant increase in the number of landlords who intend to release equity from their existing portfolios as the value of an average portfolio landlord’s properties exceeds £2 million.

The research from Foundation Home Loans shows that, of the 30% who say they intend to re-mortgage in the next 12 months, a third of those are doing so in order to release equity from their portfolios, with Foundation saying the likelihood is this released equity would be put towards further purchases.

The research also shows portfolio buy-to-let landlords are more likely to want to remortgage in the next 12 months – 43% - compared to their ‘consumer’ landlord counterparts – 20%.

The potential to add to portfolios, and the growing strength of the letting market, is shown in terms of larger landlords being typically more upbeat about the prospects for their own letting businesses.

Portfolio landlords – those with four or more buy-to-let mortgages – are more upbeat than consumer landlords (46% versus 35%), rising to 50% of landlords who own over 20 properties.

In Q2 2021 the typical portfolio was worth around £1.25m (across all landlord types) and generating an annual gross rental income of £54,000.

Specifically for portfolio landlords with more than four mortgaged properties, average portfolio values recovered in Q2 to £2,040,000 for the first time since Q3 of 2020.

The current average LTV ratio of a portfolio (of any size) is just 49.5%. Furthermore, 40% of all properties owned within an average portfolio are owned outright, with this presenting existing landlords with an opportunity to tap into equity levels which might have been recently boosted by increases in house values.

George Gee, commercial director at Foundation Home Loans, said: “We’ve seen the buy-to-let market moving steadily towards a greater level of professionalism for some years now, and this has meant a growing number of landlords are now defined as ‘portfolio’ operators and have long-term plans which involve making the most out of their properties.

“The research shows a number of key portfolio landlord intentions, particularly around extracting equity from their properties. Over the past year, in many areas of the country, we’ve seen double-digit house price growth, and even without access to the stamp duty holiday, the intention to - to take out that increased value to purchase more has grown.

“It means advisers are likely to see a growing spike in buy-to-let remortgage advice demand, and the positive news is there are very competitive product options for all types of portfolio landlords at present. At Foundation we’ve focused recently on improving our offering to portfolio landlords, not just in terms of price, but also in terms of helping them cut back on upfront costs such as fees and looking at ways we can make the process to a mortgage as seamless as possible.

“Portfolio landlords are likely to grow in number in the months and years ahead, and as specialist lenders in this space, we will continue to develop the product options and flexible criteria to help them get the most out of their existing properties to expand their letting footprint.”


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