If you’re a portfolio landlord on a tracker rate, it’s time to pay attention as the lending landscape has changed dramatically – what was once a favourable arrangement may now be costing you.
It is crucial to consider restructuring your property portfolio, especially if you secured favourable rates several years ago or if your initial loan or mortgage period is nearing its expiration.
What is portfolio restructuring?
Portfolio restructuring is a strategic process that involves making significant changes to a property portfolio’s composition, financing, and overall structure. It aims to optimise the portfolio’s performance, enhance profitability, and align it with the current market conditions and investor objectives.
The process typically involves a thorough review of the existing portfolio, including its assets, liabilities, rental income, and expenses. This evaluation helps identify underperforming properties, high-interest loans, or outdated financing arrangements that may be negatively impacting the portfolio’s financial health.
Portfolio landlords on tracker rates in today’s market: you could be losing money
Firstly, let’s look at Client A, who had a mortgage at 3.3% plus the base rate. When the base rate was at 0.10%, this was a profitable arrangement. However, times have changed, and the base rate had climbed to 4.5%. As a result, Client A’s interest rate skyrocketed to 7.8%.
To put this into perspective, when the base rate was 0.10%, Client A would have paid an all-in rate of 3.4%. On a substantial portfolio worth £9 million, this translated to an annual interest payment of £306,000. Fast forward to today, with a rate of 7.8%, Client A was paying a staggering £702,000 in interest per annum.
Consider the case of Client B, who took out a mortgage 15 years ago. Over time, their loan was acquired through securitisation, resulting in a current interest rate exceeding 9%. Clearly, this is an unsustainable situation for any landlord.
These striking examples illustrate the potential financial burden faced by portfolio landlords on tracker rates. However, there is a glimmer of hope – by reviewing and restructuring your property portfolio, you can potentially secure more favourable terms and regain control over your finances.
Portfolio landlords with legacy mortgage products are currently burdened by unmanageable rates. By undertaking a comprehensive review of your portfolio, we can assess your current situation and identify potential areas for improvement.
Matt Karagul, Specialist Finance Adviser at Henry Dannell, comments:
“We can leverage our industry knowledge, connections, and negotiating skills to help you secure more favourable fixed rates, reducing the burden of fluctuating interest rates and bringing stability to your financial situation”.
In the case of Client A, restructuring their portfolio resulted in securing a fixed rate of 5.3%. This change translated into an annual interest payment of £477,000, a significant reduction from the previous £702,000.
Ultimately, as a portfolio landlord on a tracker rate, it’s essential to recognise the changing landscape of the lending market. By being proactive and considering the benefits of reviewing and restructuring your property portfolio, you can regain control of your finances, and save a substantial amount of money, resulting in a once again profitable portfolio.
Please note: a mortgage is secured against your property. Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. The Financial Conduct Authority does not regulate most forms of buy-to-let mortgages. Please also note: tax treatment is based on individual circumstances and may be subject to change in the future. The Financial Conduct Authority does not regulate tax planning.
