Lorenzo Satchell

Private rented sector in need of support, not discouragement

Steve Cox

chief commercial officer, Fleet Mortgages

There’s no doubt that in recent months there has been a sense of disquiet around the private rented sector (PRS), despite the fact that, in terms of buyto-let mortgage business, activity levels remain very strong and there is a buoyancy to lending.

When it comes to portfolio ambition, those landlords who are investing for the long-term can see a strong future – hence the increase in remortgaging to release finance, and the continued quest to buy properties to offer up for rent.

Let’s be honest: It does not take a genius to work out that there is an ongoing shortage of supply in this space, which has pushed rents up, and that if landlords are able to surmount some considerable existing (and forthcoming) obstacles, then profitability can be achieved.

Propertymark’s latest figures reveal why rents are rising. It found that its members were registering 95 new applicants per branch in April, up from 78 in February; however, at the same time, they only had nine properties per branch empty and freely available to rent in the same month. And let’s be honest here – there is little sign that this is going to improve drastically anytime soon.

The perhaps wider point to be made here is around boosting supply, of course. As mentioned, existing landlords – where possible – are looking to purchase, but again, this is not easy in a purchase market that is also suffering from low supply.

Then there is also the issue of bringing new landlord blood into the market when the barriers to entry appear to be growing, and when the rumour mill has continued to stoke fears that the government will make it more difficult to become a PRS landlord, not less.

We already know there were plans to increase the additional home stamp duty surcharge from three per cent to four per cent, but this was pulled at the last minute. And there have been discussions about landlords having to replace kitchens and bathrooms within properties at a set interval – not forgetting the Renters’ Reform Bill, which is due to include the abolition of Section 21 evictions.

However, just recently, there appears to have been more of a step-backand-consider approach to a range of measures, which, quite frankly, do not appear to have been clearly thought through in terms of their potential to stifle further investment in the PRS.

In the buy-to-let and private rental sectors, sometimes you simply have to believe the evidence of your own eyes and ears – or in this case, your own research.

The government recently published the results of its English private landlord survey, which revealed that 10 per cent of landlords plan to sell all of their properties and exit the market in the next two years, up from five per cent when the question was last asked back in 2018.

And the reasons why they are inclined to do this? Fifty-five per cent said it was due to recent legislative changes, and 53 per cent said it was because of forthcoming changes. In other words, the greatest influence on an exit is the growing number of government measures, some of which were mentioned above.

At some point, it was my hope that someone in power – or someone who had the ear of someone in power – would realise what this would actually mean. They would begin to get a grip on the sheer number of properties this would take out of the PRS, just at the time when more, not fewer, were needed.

Now, some might argue that it is likely that PRS properties put up for sale will go into the hands of other landlords, and of course some will. But not all. Because, of course, the government has followed a policy designed to move properties out of the PRS into owner-occupiers’ hands for pretty much the last decade.

In other words, a lot of properties put up for sale do not return to the PRS – hence why we see the very low number of properties available to rent outlined in the Propertymark research.

The good news is that we may well have reached a point where it is becoming evident that fewer PRS properties is a real problem for the housing market. The government’s own statistics have revealed that a tenant is 40 times more likely to become homeless because a landlord sells up than because the tenant is unable to afford rent. If that isn’t something that stops you in your tracks, I don’t know what would.

And this is perhaps why we have had recent related announcements from the government. It has said it is not considering rental caps in England – good news, as, again, this would simply precipitate more landlords selling up. Second, it appears that the Renters’ Reform Bill has been pushed back, and I hope that when the white paper is published, it will have a fuller consideration of the potential consequences of the policies that have been put forward.

As mentioned, we need policies that not only keep existing landlords (and their properties) in the sector, but encourage them to keep adding to portfolios, and that also bring in the new blood required to meet the overwhelming tenant demand that is not going away. For too long, landlords have had to put up with policies that work against this; there is now an opportunity to think again, and to understand the true importance of the PRS. BTL I

Building relationships requires work, but rewards make it worthwhile

Jane Simpson

managing director, TBMC

Nurturing positive relationships between brokers and lenders requires work, but getting it right can deliver significant benefits for both parties. In addition to the obvious advantage of securing sales, close collaborative working can increase knowledge on both sides and facilitate valuable honest feedback, leading to informed decision-making.

Central to nurturing the relationship between brokers and lenders is the role of the BDM. In many cases, BDMs are the day-today point of contact, so they are key to how brokers see and interact with lenders and, as such, can have a significant influence over the mortgages written.

The Mortgage Intermediary Insight Report (MIIR), recently published by Paragon, revealed that just under a fifth of brokers say they are at their maximum capacity managing the volumes of business they receive, with just over a third saying that they are near capacity.

This highlights how there are opportunities for lenders to gain a competitive advantage by supporting busy brokers, but the best ways to do this may have changed.

The widespread adoption of hybrid-working means that offices are rarely full, and that’s not always convenient for drop-in visits or multiple visits in one day. As a result, the BDM role has evolved, and building relationships through face-to-face interactions is perhaps not as common as it was in the past.

This means that while getting the basics right, such as being responsive, remains important, BDMs must think differently about bringing value to brokers; those who are able to adapt to meet the specific needs of the different intermediary firms they work with are most likely to excel.

For us at TBMC, helping to increase knowledge amongst staff is an area in which BDMs can add real value, an obvious example of which is training. Our staff are highly knowledgeable on different aspects of buy-to-let, but because we work in a specialist environment, there is much to gain from getting a deeper understanding of specific facets of lending. We find particular benefit in training that sits outside of the day-to-day rates-and-criteria remit – the impact of swap rates, valuation reports, or the assessment of credit files, for example.

BDMs can provide benefit beyond the sales function, too, and broadening the remit to work with admin staff can bring an extra layer of support. In times of fast-paced rate changes, it can be key for a business to have a contact for which the admin team can just pick up the phone.

And it’s not just BDMs. Providing access to underwriters and back-office staff can offer a huge advantage for lenders, sharing their breadth of expertise and really helping them to connect with their brokers. This is particularly true of specialist lending, where the added complexity of cases often means an in-depth conversation is needed.

Not only can direct conversations with underwriters result in a faster decision, they can also help the broker to learn and gain an understanding of the lender’s criteria, processes, and rates. The better brokers understand the way a lender does things, the more likely they will be to submit applications for mortgages that lenders are willing to write, backed up with all the necessary documentation. This streamlines the process and results in fewer frustrated clients, and thus can be a stronger sales tool than rates alone.

This shows how really getting to know the people, products, and processes of partner organisations can benefit all parties involved in mortgage lending. The onus shouldn’t be entirely on lenders, however, as brokers also have a part to play in nurturing this relationship.

The sector has faced some extraordinary challenges over the past couple of years, and although we can be proud of how we’ve responded and what has been achieved, it is inevitable that things won’t always go to plan.

Lenders are having to react to conditions brought about by the current economic climate, with things like fast-paced rate withdrawals increasingly common. This leads to frustrated brokers and disappointed customers, but it is important to remain professional and not blame individuals for decisions that are out of their control. Instead, by working together, we’ll be better equipped to find the best solutions for our customers. BTL I

“The better brokers understand the way a lender does things, the more likely they will be to submit applications for mortgages that lenders are willing to write, backed up with all the necessary documentation. This streamlines the process”