Majority of landlords admit to not using a tax adviser, claims new research

Newly released research from specialist lender, Foundation Home Loans, has revealed that over half of all landlords do not use the services of a tax adviser, presenting both an opportunity and a risk for mortgage advisers.

Related topics:  Landlords
Warren Lewis
27th February 2020

According to the findings, 42% said they had been recommended one by a friend or colleague or another landlord, however only 3% said they had taken their business to an advisor recommended by their mortgage broker. 40% use one at least once a year, and 7% use one less than this.

Foundation suggested that mortgage firms should establish introducer arrangements with tax advisors to help clients get the specialist advice they need and advised that to do otherwise might mean advisers recommended unsuitable mortgage products to landlords who did not know the full extent of their own tax situation and what options would be best for them.

The landlord research - undertaken by BVA BDRC and carried out in January 2020 with the results based on 791 online interviews – also asked landlords to consider the cost of their buy-to-let mortgages over the duration of 2020. 40% felt their mortgage costs would increase, 47% said they felt they would stay the same, while 13% said they thought they would go down. Those landlords with bigger property portfolios – 20-plus – were more likely to say their mortgage costs would go up.

Foundation outlined the opportunity available for mortgage advisers with such landlord clients in, what it calls, “a highly-competitive mortgage market”. It has suggested that landlords using the services of an adviser might be “pleasantly surprised” by the rates on offer, and the mortgage product options available particularly portfolio and professional landlords.

The research highlighted the further opportunity for advisory firms with more than a third of landlords saying they had not arranged their last buy-to-let mortgage through a mortgage adviser, with nearly a quarter preferring to go direct to the lender (24%). Foundation’s research did, however, suggest that those landlords with bigger portfolios were more likely to use an adviser for their purchases, with over 70% of portfolio landlords using their services. And while 30% of landlords said they plan to remortgage at least one of their properties over the next 12 months, 61% of those said they would expect to use an adviser, 23% would go directly to a lender.

Foundation said there was also positive news from the research in the number of landlords who said they will reduce the number of portfolios they hold – this has been falling from a figure of 26% in quarter two last year to 22% in the latest iteration of the research. The number who said they would increase the number of properties they hold in their portfolios had also risen, up to 14% from 13% in the previous quarter.

Of those landlords who said they would be adding to their portfolios over the next 12 months, 55% said they would do so through a limited company vehicle, 30% would buy as an individual, 8% said it would depend on the circumstances, 7% would buy in the name of their partner, while 5% would use other means when purchasing.

Jeff Knight, Director of Marketing at Foundation Home Loans, said: “Having specialist tax advice should, in our opinion, be a non-negotiable for landlords before they make any decision about what type of mortgage they need, and how they are going to own and finance their properties going forward.

“Advisory firms clearly have a role to play in this and, it is surprising to see so few landlords saying they chose their tax adviser on the basis of their adviser’s recommendation. An introductory arrangement can work for all concerned - advice firm, tax adviser and client - and should help provide clarity on the tax position and, subsequently, the mortgage advice.

“It is also interesting to hear that large numbers of landlords believe their mortgage costs are destined to rise in 2020, especially when we have such a highly-competitive mortgage market. This clearly presents a marketing opportunity for advisers to target those landlords who may be purchasing or refinancing this year because we might suggest that their clients could be pleasantly surprised by the products and rates on offer to them.

“Rising mortgage costs are not, by any stretch of the imagination, a racing certainty for landlords especially when there are specialist lenders like Foundation who work hard to keep rates at ultra-competitive levels and have a range of criteria that can fit all landlord needs.

“Overall, there are clearly large numbers of landlords who are not using advisers to secure their buy-to-let mortgages – indeed, if they only go direct, then this might be why they feel their mortgage costs are likely to go up. It’s therefore vitally important that advisers put themselves in the shop window, not just for those landlords who would naturally use their services, but the many who seem more inclined not to take advice.

“We must continue to bang the drum about the need for, and the benefits of, advice especially to a borrower demographic who could gain a lot from access to specialist products in this area.”

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