Home Truths: Let-to-buy holds the key for patient vendors

Economic headwinds have taken the steam out of the property market, with HMRC saying the number of UK residential transactions in April 2023 was 32% lower than April 2022 and 29% lower than March this year. At the same time, property prices have experienced their first annual fall in a decade.

As with any market, the property market is driven by confidence. Periods of high confidence lead to increased activity and, when confidence is low, people tend to hold off until the situation improves. The same is true of today’s property market, with anecdotal evidence pointing to many people choosing to delay moving home until the outlook appears brighter – unless of course, they need to move now.

There are many reasons why homeowners might need to move sooner rather than later – perhaps it’s for a new job, to be near a school, or to house a growing family. It could even be the case that the cumulative impact of increased mortgage rates and the cost-of-living crisis has made some homeowners realise that now is the time to downsize. Whatever the reason for the move, now is probably not the time many would choose to try to sell their home.

However, it is possible for customers to buy a new home, without having to sell their existing property.

With let-to-buy, homemovers can remortgage their existing home with a view to letting it out to tenants, in order to raise a deposit for a new home purchase. This can be funded with a residential mortgage that allows let-to-buy purchases.

By letting their existing property, movers can then choose whether to hold onto the asset for ongoing rental income or sell the property in the future when the housing market is more buoyant. The choice is theirs, and this approach gives customers much more control when it comes to their property and ultimately their finances.

At Pepper Money, we allow let-to-buy purchases on our Residential range and we are certainly seeing increasing demand from customers who would rather let out their existing home than try to sell in the current environment.

For brokers, let-to-buy provides you with the opportunity to offer your customers a solution they may not have considered. And, if it’s right for them, they will then have two mortgages on which they need advice – the let-to-buy mortgage on their existing home and the mortgage to fund the ongoing purchase. This presents additional opportunities for touch points with your customers and helps to position you as a more holistic adviser, able to come up with inventive solutions.

There are considerations, of course, such as the stamp duty surcharge on second properties and the potential tax implications of becoming a landlord but Let to Buy can provide customers with greater flexibility and potentially an excellent investment. In the current environment, let-to-buy may just hold the key for patient vendors.