High rents, higher stakes, the strategies landlords need right now
Tanya Toumadj (pictured), CEO of Mortgage Broker Tools (MBT), is facing a market transformed by recent budget changes, which have added substantial pressures to buy-to-let (BTL) and residential mortgage sectors, especially in London.
“It’s even more important to do a thorough investment strategy and be really clear on the ROI,” she said.
And, for investors and brokers alike, shifts such as stamp duty hikes, limits on capital gains tax relief, and the freeze on income thresholds have introduced new layers of complexity. These challenges require a more careful examination of every cost and potential gain.
“All three of [these changes] have impacted both buy-to-let markets and those looking at additional homes,” she added, emphasising the new weight on investment analysis in the current climate.
Inside MBT platform
Toumadj describes MBT’s role as primarily helping brokers navigate these challenges by providing whole-market searches that allow brokers to assess which lender products best meet their clients’ needs. The MBT platform, designed to streamline the search and comparison process, hasn’t fundamentally changed its core purpose, but the platform’s utility has become even more critical given today’s more restrictive fiscal environment.
“Through our tech, we enable brokers to search whole of market and get accurate results back,” she explained. “How we do that hasn’t really changed, but the importance of it has grown significantly.”
With every percentage point in interest or lending variation having a potentially large impact, MBT’s search capabilities help brokers answer the pressing question for their clients: How can we find the best possible rate and terms in a market where every pound counts?
‘Let’s find you the best loan possible’
For property investors, this need for strategic cost management translates into practical outcomes.
“Let’s find you the best loan possible. Let’s find you the best mortgage interest rate possible,” Toumadj said. Given the increased stamp duty and the other tax constraints, brokers must dig deeper to help their clients minimise borrowing costs. The technology supporting brokers at MBT takes into account each borrower’s unique criteria, such as credit profile and loan-to-value (LTV) ratio, allowing brokers to narrow the field to viable lenders and optimise their searches.
“We see a large difference between all the lenders,” she told Mortgage Introducer, which underscores how crucial it is to match a client with the most suitable lender.
“A lot of people think the market can be quite homogeneous,” Toumadj said, “but if you look at...the lowest amount offered by a lender versus the highest, the range is about £180,000.” In her view, such discrepancies underscore the potential to find valuable options by looking beyond the obvious or familiar lender choices.
‘Choosing a specific lender has a large impact’
For brokers, the ability to assess these differences quickly is essential, particularly given the urgency many investors feel in securing the best financing in a tightening market. Stress rates vary significantly, too, with differences as high as 2.5% between lenders on two-year fixed mortgages and even more on five-year fixed products.
“Choosing a specific lender has a large impact on whether you can get the property you want and how much you’re paying for that,” Toumadj explained - underscoring the vital role of lender selection.
Reflecting on the broader changes in the types of financing structures gaining popularity, Toumadj sees clear shifts.
‘You need to be a lot more confident in your ROI analysis’
“We’re definitely seeing more applications go through on the buy-to-let side as a limited company,” she said. Limited company arrangements are increasingly favoured by more seasoned investors, often because they can offer tax efficiencies and greater flexibility, particularly when dealing with multiple properties. Toumadj links this shift to the general trend toward more experienced portfolio landlords in the market, as first-time investors are finding it harder to navigate the increased costs.
“You need to be a lot more confident in your ROI analysis,” she said. “You need to have more experience in the market.”
For experienced investors in London, where rental prices tend to be high, interest-only mortgages continue to be a popular choice.
“Interest-only is always a much higher percentage of the cases coming through,” Toumadj added, adding that these products make sense in high-rent areas, allowing investors to maximize their rental income while controlling their monthly outgoings. Additionally, MBT’s data shows a recent shift back to five-year fixed rates as these become more attractive in the current market.
“A year ago, it was a lot more people looking at two-year fixed [rates],” she explained, but given the recent decrease in rates, five-year fixed options are becoming a more attractive option for those looking for long-term rate stability. “As those rates come down, investors are looking at more five-year fixed. It’s a more palatable interest rate, and it also gives that kind of certainty.” For investors handling high-value properties, this type of product can improve affordability and predictability.
‘We’re still yet to see the demand there, to be honest’
MBT’s data tracking capabilities also reveal emerging trends and areas of growth in the London property market. Toumadj has noted an uptick in interest in Houses in Multiple Occupation (HMOs), or multi-occupancy properties, particularly as yields for these types of properties are higher.
“It makes sense when you look at...the increase in who’s renting and what you’re investing in,” she said, referring to factors like the growing student and co-living markets in London. Investors are looking at properties on the outskirts of the city, too, where prices have been rising, as areas outside the central core become more attractive options for commuting tenants.
The much-publicised green mortgages are also generating buzz, though Toumadj cautions that actual demand remains relatively low.
“We’re still yet to see the demand there, to be honest,” she said. While lenders are rolling out green mortgage products, these products remain something of a “watch and wait” issue, where broader market enthusiasm has yet to materialise.
