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Creating solutions for your landlord clients to successfully diversify

23 Feb 2024

Diversification has always been a key word for any successful business operating across the mortgage arena, and these property types are expected to become even more of interest to landlords this year.

Yellow Autumn (8)

After all, this is a market which has successfully navigated its way through regulation, the credit crunch, further regulatory scrutiny, significant legislative change (especially regarding the buy-to-let sector), the pandemic and a catastrophic mini-budget.

However, with much change occurring across the BTL sector in recent times, the need for funding remains strong, with 51% of landlords still using a BTL mortgage. When breaking down the source of funding for landlord’s next property purchase, there were two outliers in terms of trends. The first being - releasing equity from existing property or properties to generate purchase funds, 26% In Q4 compared to 13% in Q3. The second being - borrowing using a commercial loan from a bank or other organisation which saw over a four-fold rise from 5% in Q3 to 21% in Q4

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Focusing on the latter trend, it would be interesting to know what this lending rise was made up and if there was an increasing element of semi-commercial or mixed-use business included within this.

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In a post-pandemic environment, it’s fair to say that we have seen residential, commercial and recreational spaces become a little more entwined and the concept of mixed-use properties are breathing life back into city and town centres and becoming increasing popular as an investment opportunity. And, over the past 12 to 18 months, we’ve certainly noted a rise in the number of conversations with our intermediary partners around mixed-use mortgages.

Having got accustomed to a slightly more complex world of HMOs, MUFBs and holiday lets, it feels like landlords have become more comfortable operating slightly beyond their residential BTL norm and may now be looking further afield to help manage their risk exposure.

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This is one of the main reasons why we recently incorporated a mixed-use product into our new Solutions by Foundation proposition and why we will continue to carefully evaluate ways to further extend our solutions-driven offering to help more landlords successfully diversify.

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