Buy-to-let Introducer April 2021

Champion of the Mortgage Professional

BUY-TO-LET

INTRODUCER www.mortgageintroducer.com

April 2021

THE RACE FOR SPACE What next for the changing buy-to-let market?

£5

EDITORIAL

COMMENT Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Editor Jessica Bird Jessicab@sfintroducer.com Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com Deputy News Editor Jake Carter Jake@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Campaign Manager Victoria Hubbard Victoria@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk

MORTGAGE

INTRODUCER

www.mortgageintroducer.com

Contents

A buoyant property market

I

12 Feature: State of flux Natalie Thomas takes a look at how the buy-to-let market is coping with the demands of a changing rental market

t has become common to hear people say that they have had either a good or bad lockdown.

Overall it would be fair to say the UK property market has had a good lockdown.

Despite the market closing during lockdown number one it has since managed to stay open.

But it hasn’t just stayed open it has actually thrieved.

Before lockdown the buy-to-let sector seemed to have a target on its back. Someone in government had decided it just didn’t like the the cut of smaller landlords jib.

Tax changes, which are only now in the 2020/21 tax year being fully felt, started to drive out smaller - so-called accidental landords - as the government pushed for a more professional cadre of landlords.

But the past year has been good for those who remained in the sector.

Despite the pandemic strong house price growth has seen landlords increase their average capital gains.

Different types of property such as commercial and holiday lets, which both sit outside the tax changes, have become popular as the market adapts.

Holiday lets especially so considering that most Brits face the prospect of a staycation in 2021.

HMOs are also still proving popular and the additional yield can prove a big help in addressing the increasing tax burden on lanlords.

And demand is strong - especially for properties with outdoor space or office space. Finally landlords have also been able to benefit from the stamp duty incentive and bolster their portfolios.

So it’s not been a bad lockdown for for the property market. Let’s hope that momentum continues moving forward. BTL I

31

9 Paul Brett Stress testing portfolios 11 Paul Fryers Mixed emotions for the market 13 Roger Morris Simple tips for piecing clients’ cases together 15 Emily Machin How can MDR help your client?

17 Steve Griffiths HMO hotspots signal confidence in buy-to-let 19 Lauren Eaton How LendInvest sped up its service levels 21 Adrian Moloney Becoming a limited company landlord 22 Round-table – A changing world Our panel of experts discussed how the market has fared through the pandemic 28 Interview – Here to serve Marcus Dussard and Charles McDowell of Hampshire Trust Bank discuss the lender’s role in the market

APRIL 2021 BUY-T-LET INTRODUCER

3

FEATURE

COVER

A state of fl Natalie Thomas takes a look at how the buy-to-let market is coping with the demands of a changing rental market

T

he buy-to-let market has had its fair share of ups and downs over the last few years.

Yet remarkably, even in the face of COVID, the sector’s trajectory has remained stable.

While it may have lost some of its sparkle in the wake of the tax changes announced in 2015, it has proved many of its naysayers wrong and retained its appeal.

As many would-be first-time buyers continue to struggle to get a footing on the housing ladder, a rise in future tenant demand seems almost certain – which should in turn aid the sector’s future growth.

There are however a number of challenges facing the market in the short and long-term. An inability of many tenants to pay their rent as a result of the COVID crisis risks sending landlords into arrears, as does a change in rental demand which could see tenants move out of their current city locations.

Lurking on the horizon is the added financial pressure for landlords to make their properties more energy efficient. The government is proposing that all new rented properties will need to hold an energy performance rating of at least C by April 2025.

So, can the market rise to its future challenges as well as those in the past?

A REMORTGAGE BOOM The current stamp duty holiday and its subsequent extension until June 2021 has helped fuel buy-to-let demand over the last year and while purchase activity is expected to fall somewhat when the holiday comes to an end, remortgage activity in particular should keep brokers busy in the coming years.

UK Finance predicts the buy-to-let sector will experience £8bn worth of house purchase activity in 2021 and 2022.

By way of comparison – the sector saw annual buy-tolet house purchase lending of just £5bn in 2009, climbing to £9bn in 2013 and peaking at £16bn in 2015.

“Our anticipation was always that 2021 would be a strong year for buy-to-let activity, regardless of at what point the holiday ended,” says George Gee, commercial director at Foundation Home Loans.

4

BUY-TO-LET INTRODUCER

APRIL 2021

“However, with the three-month extension and the added incentive of the taper period, we are seeing a number of landlords looking at their purchase activity and also looking at remortgaging in order to potentially utilise that borrowing to add to portfolios.

“There was no guarantee that landlords would be able to access the stamp duty holiday and clearly now that it has been extended and with lockdown measures ending, we are anticipating a strong quarter two and three,” he says. www.mortgageintroducer.com

FEATURE

COVER

flux Indeed, remortgaging looks set to be at the forefront of many landlord’s minds over the coming years.

UK Finance is predicting £25bn of buy-to-let remortgage business in 2021 and 2022. Again, this compares to buy-to-let remortgage activity of just £3bn in 2009, £27bn in 2020 and £30bn at the peak of the market in 2019.

David Hollingworth, associate director of communications at London & Country, thinks the recent buoyant remortgage market can in part be attributed to landlords having taken out 5-year fixes in the build up to April 2016 - as they rushed to beat the stamp duty surcharge.

“This year will mark five years since the additional 3% stamp duty surcharge was introduced,” he says.

“The market saw a spike in activity around this time as landlords brought forward purchases to avoid the additional 3% hit.”

It was also around this time that the popularity of 5-year fixes really took off, due in part to the relaxed stress testing around such products.

As well as wanting to tap into the current low rates, another reason could also be more refined and competitive propositions from lenders.

“You have lenders such as The Mortgage Works which is now offering free legals on limited company products and other lenders starting to develop their product set and incentivise investors,” he says.

Hollingworth says investors will also likely be keeping a closer eye on their mortgage rate due to them no longer being able to offset their mortgage interest costs in the way they once could.

A RACE FOR SPACE When it comes to the type of properties investors are choosing, although there has been much talk of a potential shift in demand from inner city to more rural locations, town and cities are still holding their own, according to Richard Rowntree, managing director for mortgages at Paragon.

“Our research of 846 landlords, conducted by BVA BDRC, found that of those looking to purchase in the next 12 months, 68% are looking at buying in urban areas, despite reports of tenants looking to leave builtup city and town centres,” he says.

“Over a third - 36% - plan to buy in a suburban area and 6% are looking at rural locations. While two-thirds www.mortgageintroducer.com

- 66% - of landlords said they plan to buy in the same area as their existing properties, with 10% targeting new areas, and a fifth - 20% - said it would be a mixture of both,” he reveals.

When asked about the key attributes of properties they would like to purchase, the COVID-19 pandemic didn’t seem to have a significant influence on landlords, says Rowntree, suggesting investors were opting for a long-term approach over short-term sentiment.

“Suitability for home working was selected by 27% of landlords and proximity to green space was near the bottom of the list after being picked by 17% of those who plan to invest in the next 12 months,” he says.

When it comes to investing, landlords tend to stick to their own ‘patch’ when purchasing, says Gee. “Understandably, there will be tenants who will feel the pandemic has brought home to them the pros or cons of where they live, and there is likely to be a race to space, especially from those who can work from home more in the future,” he says.

“Landlords will no doubt respond to that, but it may well be that it’s the landlords who are already in those outer city areas who will take up the slack and add to portfolios for those tenants who are moving out of the cities,” he says.

“Research of 846 landlords, conducted by BVA BDRC, found that of those looking to purchase in the next 12 months, 68% are looking at buying in urban areas, despite reports of tenants looking to leave built-up city and town centres” Steve Cox, chief commercial officer at Fleet Mortgages, says it is seeing some increase in purchases outside of London and the South East.

“Landlords are seeking to prioritise rental yield, as compared to capital growth,” he says. “HMOs tend to deliver the most in terms of average yields, so we’re also seeing growing demand for these properties, particularly in university towns.”

HMOs consistently top the charts in terms of rental yield, says Gee, with HMOs offering yields of 7%, terraced houses 5.9% and flats 5.7%.

“It would not be surprising to see more landlords looking at their options in the HMO market,” he says.

But warns: “However, HMOs are more complicated, they carry licensing requirements and tends to need more money to purchase, so landlords would have to weigh up these considerations alongside yield and return.”

According to its research, terraced houses are still the most popular amongst those landlords who intend to invest in the next 12 months, with 50% planning to APRIL 2021

BUY-TO-LET INTRODUCER

5

FEATURE

COVER

A professional outlook needed to navigate buy-to-let Matthew Rowne director, The Buy-to-let Broker

D

espite the number of buy-to-let products being down from the preCOVID numbers, the myriad of options for a landlord in respect of buy-to-let is incredibly encouraging.

Indeed, the number of products has been steadily increasing this year with over 2,000 buy-to-let mortgages on the market currently. To provide context, this is circa 500 more than was available as recently as last May. Product numbers are also continuing to increase, as lenders flex their muscles in a bid to secure market share during the incredible buoyancy of the current property market, only stimulated further by the extension of the Stamp duty holiday. Although more lenders are operating in what is perhaps now a cramped area of the market, this will naturally ensure competitiveness in respect of rates available to landlords. This does not actually necessarily have a huge impact in improving a landlord’s - and thus brokers’- options, it just reduces their cost of funds and increases their effective yield.

What is hugely satisfying is seeing the consistent lender innovation in the market providing many more options for landlords, from higher LTVs, top slicing, bridge-to-let, and short term let options including holiday lets and Airbnb. This in turn enables lenders, specialist brokers and subsequently landlords to not only stay ahead of the curve, but to some degree actually shape it.

With increasing property prices resulting in the rental coverage requirements being ever more difficult to meet in areas with high property prices, some of the more savvy investors continue to invest in new areas, balancing the location of their investments within emerging towns and cities.

Many areas of the north continue to be a viable alternative for many investors, with the significantly higher yields both increasing leverage opportunities, and enabling landlords to dissipate much of the impact of the diminishing returns caused by the recent changes.

London rentals have seen a small percentage drop-off as people have moved away from the city due to the dual impact of Brexit, and latterly as people have moved away from expensive city living whilst in lockdown/ working from home.

However, one would reasonably expect this to be a short-term rather than long-term trend, for a myriad of socio-economic reasons.

That being said, if there is a continued trend of any scale in respect of people working from home, then it would be reasonable to expect to see a ripple effect with both property values and rental yields increasing in the boroughs just outside of the UK’s main city centres.

There can be no doubt that some tenants will struggle to keep to the terms of their tenancy.

However, the majority of professional landlords remain robust, with efficiently structured property portfolios presenting significant margins. Like any well run commercial enterprise, certainly in respect of the demographic of landlord we transact with, one would imagine that professional landlords, served well by professional specialist advice, should be able to confidently navigate the inevitable challenges ahead.

6

BUY-TO-LET INTRODUCER APRIL 2021

purchase such a property, followed by 37% a semidetached house, 26% flats and 17% a HMO. Paul Brett, managing director of intermediaries at Landbay is seeing a similar pattern, “The majority of buy-to-let lending is still residential property, however, more and more landlords are moving into HMO and Multi Unit Freehold Block (MUFB) lending to benefit from the higher yields,” he says .

BUMPS IN THE ROAD The current economic conditions may create an increase in rental demand but landlords, just like residential mortgage holders, are also currently at a heightened risk of rising arrears.

According to UK Finance, there were a total of 5,840 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in Q4 of 2020, an increase of 440 on the previous quarter. So is there a risk this figure could increase still?

“The landlords we have spoken with have a good understanding of the market and are untroubled by this risk,” says Brett.

“Even with access to the stamp duty holiday, there is a far greater cost to being a landlord now than there was five/ten years ago, plus there is going to be a continuation of the government intervention we’ve seen in this sector for some time” “Professional landlords have been working with their tenants since the original furlough position emanated.

They will always support tenant needs and manage their business appropriately. This may mean repayment of any shortfall over a longer period, for example,” he adds.

Gee says in the last iteration of its BVA BDRC research amongst landlords, 43% said they had seen their income reduce as a result of COVID, with just 55% of landlords saying their tenants had been paying their rent as normal.

“We’re aware that landlords have been working with clients who have struggled to pay rent over this period, and they’ll continue to do so,” he says. “As we know, there is a ban on bailiff-enforced evictions until at least the end of May, so it makes perfect sense for landlords, where possible, to come to arrangements with their tenants around ongoing payment. It is difficult to tell what may happen when furlough ends, given we’re unaware just how open the economy will be by then.

Certainly, market commentators have suggested that the government’s action should mean unemployment levels do not reach previous predictions, and the more people that are kept in work, the less chance there is of rental payments being missed.” www.mortgageintroducer.com

FEATURE

COVER Aside from the issues around COVID – another potential threat on the horizon is the need for landlords to improve their properties.

“Under government proposals, all new property being let for new tenancies in the private rented sector (PRS) must have an Energy Performance Rating (EPC) of at least C by 1 April 2025. By 2028, that applies to all let property,” says Rowntree.

Currently, the Minimum Energy Efficiency Standards (MEES) allowed for rented properties is E. “The profile of PRS stock means that it has a greater challenge than other tenures. Just under half of PRS dwellings are built pre-war, whilst a quarter are midterraced, which are more difficult to generate tangible improvements,” says Rowntree.

RISING COSTS So, could the uncertainty over COVID and the increased costs for landlords prove too much for some?

“People go into buy-to-let for different reasons and while the ultimate goal would be to turn a profit, there are other ways property investment can bring a return,” says Brett.

“These include a monthly rental income, monetary protection from inflation by investing in property and long-term property value appreciation. People also like to have a tangible asset that you can actually see and visit, rather than an intangible financial product,” he says.

Nevertheless, there is no escaping the fact that investors’ costs have increased considerably in recent years.

“As always the regulatory and financial burden of being active in the private rental sector is a constant consideration,” says Gee. “Even with access to the stamp duty holiday, there is a far greater cost to being a landlord now than there was five/ten years ago, plus there is going to be a continuation of the government intervention we’ve seen in this sector for some time.”

Costs might be increasing but with the latest figures from the Office for National Statistics showing that the average UK house price increased by 7.5% over the year to January 2021, for those that do invest wisely – the capital growth from property is still evident.

While further innovation from lenders and some strategic investing will be needed to keep the sector on track, there is still much working in its favour.

Even in the face of rising costs, Cox believes the strong fundamentals of the sector should keep it on a sound footing.

“Buy-to-let and the PRS tends to be counter-cyclical and given the macro-economic backdrop, tenant demand has actually risen,” he says.

“Given the lack of social housing policy in UK, this demand has to be met somewhere else and it’s actually the PRS which meets it. That is not going to change anytime soon – a point which both existing and new landlords will be aware of,” he states. BTL I www.mortgageintroducer.com

Buy-to let appetite will continue to grow Lucy Barrett managing director, Vantage Finance

B

uy-to-let was on a great run before the pandemic but has gained even more momentum in recent months, mainly due to the stamp duty holiday. There is a lot of competition in the market with lenders more comfortable lending, LTV’s creeping up and rates dropping daily.

Landlords have a good range of products to choose from. Many landlords may not have otherwise purchased any more properties but because of the stamp duty, they have gone ahead. This is true of some first-time landlords who have taken advantage of not having to pay the additional stamp duty.

But, what about when the stamp duty holiday ends? It could go either way, and it is hard to predict. However, whilst it’s been a useful initiative to keep the market moving in general my feeling is that it doesn’t entirely underpin the momentum we are seeing now. Following the December 2019 ‘Boris Bounce’ we had a nice run in Q1 before the pandemic hit and the mood was positive and confident.

There was a lot of talk about whether the pandemic would have a V shape or U shape recovery and I am quietly confident in the former. Brexit is finally off the table, there is light at the end of the tunnel for businesses and people impacted financially throughout the last 12 months.

Yields vary depending on location, with it being well known that locations such as the North of England and parts of Scotland return higher yields – with some bringing in up to 8%.

These areas will always attract more landlords who need yield and don’t necessarily operate in the HMO sector; and those landlords will generally get more for their money. Although, a good landlord who invests well and stays in touch with the market will always make money if they maximise on the potential of the properties they purchase, such as by converting them into HMOs – this has grown significantly in popularity and allows the landlord to add both yield and capital growth. If the pandemic hadn’t happened, 2020 would likely have been strong for buy-to-let and that appetite to grow portfolio is likely to continue even after the end of the stamp duty holiday.

Landlords have come to terms with the new taxation regime in buy-to-let and as we do as a nation, evolved and found ways to continue their business.

With the pandemic came the staycation, which is where the buy-to-let market could see more growth. There is still uncertainty about travelling abroad, and a greater demand for Airbnb and holiday lets which I believe will only increase.

This is a good area for landlords to branch into if they hadn’t before, albeit lending is a little more scarce at this point in time for those properties. This will change in my opinion. Overall, I think the buy-to-let market will continue to grow but predict a slight decrease in applications after the stamp duty holiday ends. I still feel even with a decrease we will have had one of the best years for buy-to-let and that goes for first-time landlords, professional landlords and limited companies. It will be interesting to see what happens from June onwards.

With the end of the pandemic in sight – for now at least – and the stamp duty holiday ceasing, I think the market will stabilise before setting off on again on an uphill stance.

APRIL 2021 BUY-TO-LET INTRODUCER

7

Buy-to-let.

Hello Landbay Free valuation and large loan cashback products now available • Trading limited companies • Market-leading rates • Up to 80% LTV • No ERC products

Call our team on 020 7096 2700 Landbay.co.uk 203_Mortgage Introducer_BTL_Supp_TradingComps_v1.indd 1

01/04/2021 16:35

REVIEW

PORTFOLIOS

Stress testing buy-to-let portfolios Charles McDowell Paul Brett managing director – specialist mortgages, managing director, HTB intermediaries, Landbay

T

here have been major rule changes around buy-to-let over the past five years from taxation to the introduction of stricter stress testing rules.

In September 2017, the Prudential Regulatory Authority altered its rules for regulated lenders testing the affordability of ‘portfolio landlords’ buying property with a mortgage.

The PRA defines a portfolio landlord as someone with four or more mortgaged properties. Instead of just applying a stress test to the loan being taken out, the rules stated the whole portfolio had to be stress tested.The reasoning behind this was that the PRA wanted to ensure the underlying affordability of the portfolio was robust.

It felt lenders should be aware of any problems the borrower might have with other properties.This in turn gives the lender better insight into a borrower’s financial and business position.

Obviously, this meant extra work for brokers and lenders and some players pulled out of market. But we saw an opportunity to work within the PRA guidelines and specialise in this area.

TECHNOLOGY TESTING PORTFOLIOS

We work with CoreLogic’s BTL Hub system, which does all the necessary calculations of affordability testing on the whole portfolio.

The broker inputs the details of all the properties in a portfolio into the system, which verifies the information given. The system runs an AVM in the background against each property, it checks for Energy Performance Certificates as (buy-to-let) BTL www.mortgageintroducer.com 16:35

on a 2-year fix, we would usually use an ICR of 125% at an interest rate of 5.5%. HMOs and MUBs might have slightly higher ICRs, for us usually between 130% and 140%.

CALCULATION FOR THE RENTAL INCOME

properties must have an EPC rating of at least E. It also provides an estimate for rental income for each property using comparable local data. Once the information is keyed in by the broker, it is there for other lenders to see. If a broker is growing their portfolio, the information will be on the system next time they apply for a mortgage so the system will just run the background checks again across the portfolio. There is no need to rekey the information, just update it if need be, for example, remove properties that have been sold.

We apply a stress model to the portfolio to assess affordability of the borrower. All lenders have their own criteria for stress testing. For us, the underlying background portfolio must meet a minimum Interest Cover Ratio (ICR) of 125% based on an agreed stress rate. This means the rental income from a property has to be at least 25% more than the repayments of the loan and we assume an interest rate of 5%. The ICR acts as a buffer and if there was a rise in interest rates then the rent would be able to support the increase in the mortgage.

Total mortgage × interest rate ÷ 12 months = monthly interest only payment x ICR = minimum rental income required.

THE MORTGAGE

We have very few issues underwriting portfolios and most landlords pass as we tend to deal with the professional end of the market. If a property is not working in terms of return on yield the landlord simply sells it.

These landlord portfolio rules are now embedded into the everyday life of those lenders, brokers and landlords who specialise in this part of the market.

The intermediaries we work with have got used to using our system and it runs well. Brokers can get to know their clients better, as they have a more detailed understanding of their business needs and portfolio risks. This enables them to have a more meaningful discussion with the lender about their clients’ situation. BTL I

EXAMPLE:

House costs £100,000 using a 25% deposit so client borrows £75,000 LIMITED COMPANY

£75,000 x 5.5% interest rate = £4,125 £4,125 ÷ 12 months = £343.75 monthly interest only payments £343.75 x 125% ICR = £429.69 minimum rental income We have now made it easier for intermediaries to make calculations before making an application for their clients. Intermediaries can use our new BTL mortgage calculator which takes account of the product, type of property and whether the client is an individual or limited company.

Within seconds, the calculator gives the minimum rental requirement. The intermediary then has the option to submit for a decision in principle.

BENEFICIAL FOR BROKERS

The individual loan the borrower is applying for is also stress tested but it is done in a different way to the portfolio testing. The single loan is stress tested based on the property type, the applicant, and the loan period.

The PRA rules state you must look ahead five years to assess whether borrowers will still be able to afford the repayment if rates rise. The ICR we use for two-year fixed rate and tracker products are stressed at an interest rate of 5.5%. Because of this 5-year rule, the rate used for stress testing on 5-year fixed rates is the interest rate the borrower is paying and does not have to be 5.5%.

For a standard limited company buying a single self-contained property

APRIL 2021

BUY-TO-LET INTRODUCER

9

BBROAD

FOR INTERMEDIARIES ONLY

IS FOR

The A to Z of BTL

CRITERIA

Criteria highlights...

95 No upfront application fees* and ZERO product fee options across our entire product range

Flats above commercial properties

Max. age 95 years at end of mortgage term

60% minimum shareholding for Ltd companies

No minimum income for Standard applications, £25k gross for professional landlords

Modern construction types considered

No height restriction on flats & Deck Access

Unlimited background portfolio with background portfolio stress testing at 100% of mortgage payments

Income top-ups acceptable

Talk to our experts today…

Call: 0370 707 1894 Email: enquiries@zephyrhomeloans.co.uk Visit: zephyrhomeloans.co.uk *Other fees & costs apply. We reserve the right to withdraw and amend our products at any time without notice. Please note - this is a guide to our criteria and in certain situations our underwriters may have discretion to consider exceptions to our lending policy. Each application is considered on its merits and we do not guarantee acceptance of all cases which meet our headline criteria. Please contact us to discuss the specific circumstances of your case.

This information is correct at September 2020. We reserve the right to withdraw and amend our products at any time without notice. All applications are subject to our full Underwriting Criteria, details of which can be found on our website.

Zephyr Homeloans is a trading name of Topaz Finance Limited. Registered in England & Wales. Company No 05946900. Registered address: The Pavilions, Bridgwater Road, Bristol BS13 8AE. Topaz Finance Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No 461671). Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.

12Q01B D90 (04/2021)

REVIEW

MARKET

Mixed emotions for the market Paul Fryers managing director, Zephyr Homeloans

A

fter an unprecedented 2020 and a tough start to 2021, it’s easy to get emotional about the challenges we all continue to face.

Thankfully, as we head toward summer, things are looking up – with mass vaccinations, falling infection rates and the gradual easing of lockdown restrictions helping us move back toward a more normal way of life.

What’s more, the warmer weather means my work from home heating bill is coming down, so that’s another reason to be positive.

With the general mood improving, it’s worth reflecting on the prospects for the BTL market.

Should we be cheerful or fearful about the outlook for the rental sector?

In my opinion, whilst there is a lot for landlords, brokers and lenders to be positive about, there are also some challenges ahead.

To set some context, Zephyr Homeloans is a dedicated BTL lender serving the standard and specialist sectors of the market.

We’re part of Computershare Loan Services (CLS), a business which manages around £41bn of residential and BTL mortgages. Computershare also owns The Deposit Protection Service (The DPS), which is the original Government-approved custodial deposit protection scheme currently holding over 1.8 million tenancy deposits.

Together, this huge footprint means we can access a vast amount of useful data about the rental market, and it’s great to be able to share our insight with the Mortgage Introducer audience.

Each quarter, The DPS produces a Rent Index report which offers a fascinating glimpse into the latest situation with rental values across the www.mortgageintroducer.com

UK. In the Q3 2020 Rent Index, we saw the emergence of a trend towards increased rental growth for larger detached or semi-detached houses, compared to smaller property types such as flats.

The latest report, focusing on Q4 2020, was released in mid-January.

This revealed that average UK rental values continued to grow faster than inflation, in part driven by the continuing trend for upsizing to larger homes. So, in a year that saw us face a complete market shutdown amidst wider economic and social turmoil, I think we can find solace in the fact that the rental sector has shown such remarkable resilience.

SHIFTING PROFILE

To add some more colour to these findings, the DPS have also recently conducted an intriguing one-off survey looking specifically at tenants who moved during the pandemic.

This suggested that older people have become more likely to move to the countryside whilst younger people are more often choosing to live in towns.

Of the 1,300-plus tenants who said they moved during the six months up to January 2021, the proportion of respondents aged between 60-75 now living in rural areas increased by 9% (from 30% to 39%) whereas the proportion of this age group living in towns decreased by 7% (from 45% to 38%) and in city centres by 4% (from 7% to 3%).

Conversely, the proportion of 18-35 year olds renting property in towns increased by 5% (45% to 50%), with the proportion living in rural areas falling by 2% (15% to 13%).

The study also confirmed that tenant demand is increasing for property types that typically offer more space.

To highlight some examples – amongst 18-35 year olds, the proportions living in shared accommodation decreased by 2% (from 16% to 14%) and those living in semi-detached homes increased by 3% (from 16 to 19%). For respondents aged 35-60, the proportion

living in flats dropped by 6% (from 26% to 20%) whereas the proportions living in detached homes increased by 7% (from 15% to 22%).

I believe these changes in rental demographics signify that many tenants have reassessed their property needs during the second half of the year, partly as a response to the pandemic.

For younger tenants, this could be due to the prevalence of home working and a shift to more flexible working arrangements.

For older tenants, the disruptive impact of lockdown restrictions on urban life could well be fuelling their desire to move to more spacious rural properties.

OPPORTUNITIES

These shifts in demand will no doubt create opportunities for landlords who are able to capitalise on increased demand for more larger rental properties, in areas offering more space.

We’re already seeing this happen at Zephyr, with an increasing proportion of our recent cases being from professional limited company investors who are looking to diversify their portfolios with different property types in higher yield areas.

Clearly, some pockets of the sector may not be as buoyant, and we should be mindful that the market remains volatile. At a local level, Increased demand and rising rents for larger properties in some areas could mean falling demand and declining rents elsewhere.

Perhaps more importantly, with the furlough scheme winding back on 30 April, the extended stamp duty holiday due to end in September and the highly charged issue of property cladding still to be fully addressed – there are also some significant market-wide headwinds for us all to face.

Amidst these mixed emotions, at Zephyr we remain fully committed to the BTL sector and look forward to working with brokers in 2021 to make the most of the opportunities that arise. BTL I APRIL 2021 BUY-TO-LET INTRODUCER

11

4 ways we’re good for buy to let cases 1 2 3 4

No maximum portfolio size Options available for up to 10 bed/unit HMOs/MUFBs First-time landlords with up to 6 bed/unit HMOs/MUFBs welcomed Day one remortgages available

Our flexible criteria, paired with an experienced underwriting team who individually assess every case they receive, means we could help where others may struggle to.

Call us today on 01634 888260 Or visit krfi.co.uk FOR INTERMEDIARIES ONLY

REVIEW

APPLICATIONS

Simple tips for piecing clients’ cases together CharlesMorris Roger McDowell group distribution managing director director, – specialist Kent Reliance mortgages, HTB for Intermediaries

M

any of us have been turning to simpler, more creative ways of passing the time during lockdown.

Whether it’s picking up that book we’ve been meaning to read for ages, tidying the garden ready for spring, or trying out an adventurous new recipe, it seems more of us are turning away from our screens and finding new ways to stay entertained.

Apparently, one of the ways we’ve been keeping busy is by doing jigsaws – and a lot of them. Sales of puzzles have soared over the past year, with £100m-worth sold in 2020, up 38% on the previous year.

Many theories have been put forward explaining the enduring popularity of jigsaws since the first puzzle was created more than 250 years ago.

Maybe it’s the challenge involved in finding a solution, perhaps the satisfaction of taking lots of disparate individual pieces and seeing them come together as a whole, or it could be the satisfyingly methodical, common-sense approach that’s required.

Whatever the reason, the attention to detail that’s needed to successfully complete a jigsaw is similar to the approach we take to underwriting here at Kent Reliance for Intermediaries.

SOLVING THE LENDING PUZZLE

Whether it’s a buy-to-let (BTL) or residential mortgage application, our experienced underwriters will individually assess each and every case they receive and make a judgement based on its unique merits.

We look at all of the pieces collectively, rather than the individual www.mortgageintroducer.com

elements in isolation, giving us the ability to consider applications that other lenders may not be able to.

We want to find ways to approve an application, rather than reasons to reject it, so we approach every application with a ‘look to lend’ attitude.

We want to be a true partner to brokers, working with them to help make their clients’ property ambitions a reality.

Even though our systems and processes have changed over the years, adapting to the changing needs of brokers and their clients, one thing has remained the same: you will still receive a manual approach with a human touch. A person will make the final decision, not a computer.

“We want to find ways to approve an application, rather than reasons to reject it, so we approach every application with a ‘look to lend’ attitude” Our award-winning sales team is on hand to answer any questions that might arise, and our business development managers have the knowhow that’s needed to help you with complex cases.

What’s more, our dedicated broker liaison team can offer guidance and support over the phone, as well as through our ‘live chat’ function, whilst our buddy system means the various teams work closely together to achieve the best outcome for your customers and ensure you’ve always got someone to speak with.

It’s this commitment to providing outstanding service that resulted in us earning a coveted five-star rating for our mortgages at the Financial Adviser Awards 2020.

HELPING US PIECE TOGETHER THE PERFECT CASE

There are also ways you can help us piece together your customers’ cases, so I thought I’d share some guidance on packaging a case and getting it right first time:  Always double check names, dates of birth, and address histories, and that the income keyed corresponds with the evidence you provide. Also check how the applicant details need to be typed, that the National Insurance numbers are correct, and if a case has been pre-agreed or discussed, that you add a note confirming the details.  Ensure that all documents on the checklist in our portal are submitted, so that the underwriter has all the information they need to make a decision. There are different requirements depending on the type of loan, so please check carefully. As a rule of thumb, the more relevant information you can provide, the quicker the final outcome can usually be delivered.  Our underwriters are human, and adding a note explaining the case in more detail helps them to build a picture. This might include blips in a customer’s credit, residential history or complex incomes. We don’t need their life story, but a short paragraph or two can add a bit of colour, which could make a big difference to the final outcome.  Finally, pay close attention to those bank statements. It can be really frustrating if a case is held up because of an issue with a statement, so always make sure to check they’re consecutive and contain all of the key information that’s required.

As one of the UK’s leading specialist lenders, we’re here to support you and your clients. We know that finding a solution to your customers’ borrowing needs can sometimes feel like a puzzle.

However, just like finding the four corner pieces of a jigsaw, these tips I’ve outlined can help the rest of the pieces fall into place.

To find out more about how we can help, please visit www.krfi.co.uk, speak with your local business development manager, or call on 01634 888260. BTL I APRIL 2021

BUY-TO-LET INTRODUCER

13

For your HMO or MUFB clients: • Up to 20 bedrooms/units for HMOs/MUFBs • No maximum portfolio size • Single loan for multiple properties • No maximum property value

InterBay it.

Using our expertise and detailed understanding of the market, we’re determined to provide bespoke solutions for your HMO and MUFB clients.

So the next time you’re facing a challenging buy to let case... InterBay it.

Speak to your specialist finance account manager today or visit interbay.co.uk for more information.

FOR INTERMEDIARIES ONLY

REVIEW

STAMP DUTY

How can MDR help your client?

Emily Machin head of specialist finance, InterBay Commercial

I

think it’s fair to say that the stamp duty holiday on the first £500,000 of property purchases has given the housing market a welcome boost.

When Chancellor of the Exchequer Rishi Sunak announced back in July 2020 that he was temporarily freezing the tax, the move was seen as a real boost for a market which had virtually ground to a halt.

Since then, the market has flourished. According to Nationwide’s latest House Price Index, annual price growth reached 6.9% in February, and the average house price hit a record high of £231,068.

Originally scheduled to finish on 31 March 2021, Sunak announced in the Spring Budget that the holiday was being extended until 30 June. After this date, the starting rate of stamp duty will be £250,000 until the end of September 2021, before returning to its usual level of £125,000.

These changes have been positive for landlords who are looking to grow their portfolios. Whilst the 3% additional property surcharge has remained in place, they have still been saving on paying any more tax on homes worth up to £500,000.

Before the holiday came in, a landlord looking to purchase a new buy-to-let (BTL) property of £500,000 would’ve been expected to pay £30,000 in tax. With the holiday, this bill has been reduced to £15,000.

Whilst the holiday is still in operation, there is a way landlords looking to expand their portfolios can save even more in stamp duty.

Multiple dwellings relief (MDR) allows the stamp duty on the purchase of two or more dwellings to be calculated by taking their average value multiplied by the number of properties, instead of the total purchase price.

www.mortgageintroducer.com

Landlords can claim MDR when they buy more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling. If a landlord can claim relief, they can work out the rate of tax HMRC charges by:  Dividing the total amount paid by the number of dwellings  Working out the tax on this figure  Multiplying this amount of tax by the number of dwellings The minimum rate of tax under this relief is 1% of amount paid for the dwelling.

HOW MDR WORKS

Let me give you an example of how much a client could potentially save using MDR. Say you are approached by a property investor who is purchasing three flats from a builder, costing £300,000 each.

They are also buying a house of multiple occupation (HMO) property from the same builder at a price of £600,000. The total cost of the properties is £1.5m. The transactions are linked.

Assuming the client doesn’t claim MDR, the stamp duty they would have to pay would be as follows: Purchase price bands

Percentage rate

Stamp duty due

Up to £500,000

3%

£15,000

Above £500,000 and up to £925,000

5%

£34,000

Total stamp duty due

18%

£123,750

However, if the investor was to claim MDR, the amount they would have to pay would be reduced. £1.5m divided by four properties is £375,000.

This example is for general informational purposes only, but it does

illustrate how much money an investor could potentially save by claiming multiple dwellings relief.

Purchase price bands

Percentage rate

Stamp duty due

Up to £500,000

3%

£11,250

Total stamp duty due

3%

£45,000 (£11,250 x 4)

If you’re approached by a client who needs specific advice, you should always encourage them to speak with a professional tax adviser.

HOW INTERBAY COMMERCIAL COULD HELP

As experts in providing bespoke solutions for brokers and their clients, our in-house teams – including our national sales team, real estate, completions and underwriting – work closely together to craft tailored solutions to support people with their lending goals.

We’ve got a vast amount of experience when it comes to large portfolios, and with our extensive market knowledge and range of products, we look to say ‘yes’ when others say ‘no’.

Our criteria also supports multiple properties on a single facility, and includes options catering for unique ownership structures.

There is no limit on the number of properties we will consider in a portfolio, and our buy-to-let hub uses the e-tech system, which will take care of the process of verifying your clients’ portfolios for you.

Sound interesting?

Then let us go the extra mile for you and InterBay it.

To find out more about how we could help, contact your local specialist finance account manager today, visit www.interbay.co.uk or call 01634 835006 to speak with our dedicated broker sales support team, who’ll be more than happy to help. BTL I APRIL 2021

BUY-TO-LET INTRODUCER

15

No minimum personal income required (excluding Ex-Pats) Minimum rental income of 125% Individuals, limited companies and expats can all apply Available on multi-unit blocks, HMOs and flats above commercial premises

REVIEW

HMOS

Hotspots sign of buy-to-let confidence Charles McDowell Steve Griffi managing director ths– specialist sales and mortgages, product director, HTBMortgage Lender The

I

f you would have told me a year ago that the housing market would be as buoyant as it is now, I do not think I would have believed you.

In a year unlike anything in living memory the one area of the economy that could have gone either way has come out strong, stronger than we have seen for over a decade, and buy-to-let is no exception.

In the summer last year, we asked landlords if they saw the pandemic as a problem or an opportunity and if they were looking to increase their property portfolios.

Three in ten landlords said they saw an opportunity and those landlords looking to increase the number of properties they own had jumped by 71%.

The survey, conducted by OnePoll between 1 July and 8 July last year, revealed 19% of landlords intended to increase their portfolios over the next 12 months compared to 12% who were looking to add buy-to-let properties in April 2019.

Although 35% of landlords saw COVID-19 as a problem, it had made no difference to the investment plans of half of investors, while 25% said it had changed their plans somewhat, and 25% said it had changed their plans completely.

Overall, the number of landlords who wanted to reduce the number of properties they own went down from 16% in April 2019 to 14% in 2020; meanwhile, those looking to maintain the same number of properties went down from 72% to 67%, with the resulting 7% difference accounting for the uptick in landlords who want www.mortgageintroducer.com

to expand their portfolios. It’s easy to see why when you look at the figures.

There are some basic economics that underpin buy-to-let as an asset class.

Where else in the economy can you achieve returns between 4% and 7% a year with the added bonus of capital growth?

Where else can you achieve that capital growth on a £200,000 investment with a deposit of just £50,000? In a low interest environment buy-to-let, and the leveraged returns it can deliver, is a no brainer for savvy investors.

Add in that the vast majority of landlords are buying through a limited company and you can see why.

Investments are now structured to minimise tax and maximise cost offset, which you can do in a limited company but not as an individual.

It also future-proofs their investments against any changes to personal taxation while providing a structure that can be used to gift assets, or profit share, to family and help with inheritance tax planning.

We’ve seen landlords taking

Birmingham is just one of the HMO hotspots

advantage of these benefits in record numbers. Over the last year, we’ve recorded an increase in capital raising mortgage applications, a rise in limited company applications, which now account for eight in ten applications we receive, and more landlords buying houses of multiple occupation (HMOs).

While our cities have been eerily empty, landlords have been busy buying HMOs in anticipation of an economic bounce that will drive an influx of retail, hospitality and professional workers once shops, bars, restaurants, and offices open up again.

In part, that’s because HMOs now are not the same as they once were, they are no longer the last chance saloon for people who cannot afford a flat of their own.

The landlords buying them now are professionals, who know their market and what they need to do to make their properties attractive.

It also means the quality of accommodation is better and a great choice for professionals who want the social aspects of a house share.

Birmingham, Manchester and London are the HMO hotspots our landlords have focused on and the figures speak for themselves. In Salford, Manchester, a landlord can pick up a six-bedroom HMO for around £450,000 and charge £350, excluding bills, for each room.

That’s a yield of 5.6% with the added bonus that tenants, while they will come and go, are unlikely to do so at the same time, so a void period in one room is less problematic than a void period in six.

In contrast a two-bed apartment close by will set a landlord back £300,000 or more, depending on the prestige of the development, and command monthly rent of around £1,000, a yield of just 4%, and with more likelihood of a disruption to income when a tenant moves on.

When the government announced the tax changes for landlords it was aiming to professionalise the sector.

That is exactly what it has achieved, we now have professional landlords, better quality accommodation and greater choice for tenants – and I think that is a good thing all round. BTL I APRIL 2021

BUY-TO-LET INTRODUCER

17

Making Buy-to-Let deals simpler ID verification from a smartphone Integrated credit searches Open Banking for faster underwriting

Property finance made simple

lendinvest.com

LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). Your client’s property may be repossessed if they do not keep up repayments on their mortgage.

For intermediaries only.

REVIEW

SERVICE

How we sped up our service levels Charles McDowell Lauren Eaton managing director – specialist mortgages, head of lending operations, HTB LendInvest

W

hile the pressures of the past year may have prompted lenders to conceal their service levels as processing times felt the crunch of pent-up demand following lockdown, the buy-to-let lending team at LendInvest has approached it differently.

For our buy-to-let product, we’ve published new figures weekly so that brokers and their clients knew what to expect when working with us, whatever the figures showed.

Since the start of the new year, we’ve seen key metrics improve and the time to offer fall considerably; here’s how the team has done it.

WHERE WE WERE AND WHERE WE ARE

Due to increased volumes our packaging turnaround times at the start of the year were around three days.

On top of that our valuer capacity was stretched with some areas taking nearly two weeks to carry out inspections and return reports. Our offer times also took a hit with the underwriters working 10 days behind usual SLAs. From this point the team has worked tirelessly to restore business as usual.

Packaging is being actioned the same day, and providing we have all the required information underwriters are producing offers the same day as the valuation report is received.

Valuers are also now working to their usual SLAs averaging five days from instruction to receipt of report.

HOW WE FIXED IT

The sheer volume of cases was a challenge for the team.

With the pressure of the stamp duty holiday due to end at the end of March it meant we had to work hard to get through the backlog of cases, while providing a good service to our brokers.

We wanted our experienced case managers and underwriters to focus on packaging and producing offers.

So we hired some administrators to assist with answering phones and ensuring brokers were being provided with updates they needed.

“Packaging is being actioned the same day, and providing we have all the required information underwriters are producing offers the same day as the valuation report is received” We also implemented automated standard updates so brokers knew where their cases were in the process.

Internally, we focused on delivering technology and automation to help speed up the process.

Working closely with our tech team we quickly established the pain points within our internal processes and delivered integrations and automation to assist with the packaging process.

By building out rules to help identify areas that needed attention within the application, our team was able to deal with those early in the process to allow time for brokers to provide any additional information while the valuation takes place. This has allowed us to produce offers quickly and tweak our credit criteria where we saw particular trends and hold ups.

KEEPING IT GOING

The LendInvest team has worked tirelessly to restore business as usual

www.mortgageintroducer.com

To get back to a healthy position with our service levels we have improved our working processes in a way that will keep driving improvements, with the tech enhancements making it easier for our team to deal with higher volumes so they should be more resilient in future.

Further technology and team investments will continue to drive down the time it takes to offer buy-to-let deals. BTL I APRIL 2021 BUY-TO-LET INTRODUCER

19

BUY TO LET MORTGAGES

Buy to Let Mortgages DIP in minutes Here at Precise Mortgages, we’re proud to help your landlord customers where the high street can’t.

5 year fixed rates Affordability assessed at pay rate

Blended ICR calculations Based on individual circumstances

Options for first-time buyer landlords With no minimum income requirements on loans under £1m

Limited company landlords No limit on the number of director dependant shareholders aged under 21

Decision in Principle Get a Decision in Principle in minutes

FOR INTERMEDIARY USE ONLY.

0800 116 4385

precisemortgages.co.uk

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

01-PM-BTL-06 (2)

Contact your local BDM

REVIEW

LIMITED COMPANY

Becoming a limited company landlord Charles McDowell Adrian Moloney managing director – specialist mortgages, group sales director, HTB Mortgages Precise

A

mong the people watching the Chancellor of the Exchequer’s most recent Budget announcement with bated breath would have been the thousands of landlords who run their buy-to-let (BTL) businesses as a limited company.

The growth in the number of landlords deciding to incorporate has become a key feature in the market in recent years. In fact, according to estate agents Hamptons, the move has become so popular that 2020 saw a record number of landlords incorporating their businesses.

Hamptons’ latest Lettings Index shows there were 41,700 BTL incorporations in 2020, an increase of 23% on 2019, with numbers more than doubling since 2016, rising 128%.

Hamptons also found that companies set up to run buy-to-let businesses were the second most common company founded in 2020, just behind those set up to sell goods online or via mail order.

By the end of the year, there were more than 228,000 BTL companies up and running, an all-time high.

The results are backed up in BVA BDRC’s latest Landlords Panel Report, which found that more than half of landlords planning to purchase a new buy-to-let property said they will do so within a limited company structure.

01-PM-BTL-06 (2)

WHY ARE SO MANY LANDLORDS INCORPORATING?

So, why are so many landlords choosing to run their buy-to-let businesses as limited companies?

Well, the introduction of the stamp duty holiday last summer has certainly www.mortgageintroducer.com

played a part, as it has allowed landlords to transfer properties across without incurring the normal standard rate of tax.

However, I think the real reasons for the increasing numbers go back much earlier than that.

In 2015, the then Chancellor of the Exchequer George Osborne announced that the government would cut corporation tax to 19% from 2017. As limited companies are only subject to corporation tax, instead of income tax, this was great news for landlords who were already running their businesses in a limited company structure.

Following that announcement came the news that the phased withdrawal of mortgage interest tax relief was going to be introduced.

Up until the 2016/17 tax year, landlords could deduct mortgage interest and other allowable costs from their rental income before calculating their tax liability. Following the changes, landlords now only qualify for a 20% tax credit, meaning that many are finding it harder to turn a profit.

The new rules don’t apply to limited companies, however. Landlords who have incorporated their buy-to-let business can still offset mortgage interest against profits.

All of which brings me back to why so many of these individuals would have been watching Sunak’s Budget announcement so nervously.

Many commentators were predicting an across-the-board increase in corporation tax to 25%. However, Sunak stopped short of that, and businesses with annual profits of less than £50,000 will see the tax rate held at 19%, with the rate rising until it reaches 25% for those with profits of more than £250,000.

As the BVA BDRC report shows, the average limited company landlord only has 7.7 properties in their portfolio. So, this is only likely to affect those with

larger portfolios, or portfolios which generate particularly large profits. The majority of landlords can breathe a sigh of relief.

The increased use of limited company status is further evidence of how the buy-to-let market has changed in recent years.

It also throws into sharp relief how brokers and their customers need expert specialist support when buying a property as a limited company, or if they’re considering switching their existing portfolio into a limited company structure.

HOW PRECISE MORTGAGES CAN HELP

As one of the UK’s leading specialist lenders, Precise Mortgages is ideally placed to help you find the product to suit your customer’s needs.

We understand how challenging these cases can be, and have a range of mortgages and tools specifically designed to help customers with complex lending needs – as well as those underserved by high street lenders – to make the most of new investment opportunities.

We’ve made our process as straightforward as possible, and you’ll receive support every step of the way.

We offer fixed product fee options, ideal for those larger loans, and don’t forget that 5-year fixed rate mortgages are assessed at pay rate.

Customers can borrow up to £3m over a maximum term of 35 years, and there’s no limit on the number of director dependant shareholders under the age of 21.

Customers can have up to 20 properties to a total value of £10m with us, and we don’t impose a limit on the number they hold with other lenders.

With the trend for landlords to think about running their BTL business as a limited company likely to continue for the foreseeable future, it’s good to know there are lenders that are expert in dealing with these sort of cases.

If you’d like to find out more or have got any questions, visit www. precisemortgages.co.uk, speak with your business development manager or call our dedicated support service on 0800 116 4385. BTL I APRIL 2021

BUY-TO-LET INTRODUCER

21

PANEL

MARKET

LOOKING AT A CHANGING WORLD At the Buy-to-let Introducer round-table, the panel discussed how the market has fared through the pandemic, the increasing fear of homelessness among renters, and the matter of growing regional divides In association with

W

ith an increasing number of people now vaccinated, and a long-term roadmap laid out to leave lockdown, it seems the end is in sight. The government reports that the number of first doses administered each day is averaging 350,000, with 30 million people in the UK having received at least one dose of a coronavirus vaccine, and 3.5 million having had their second.

However, the fact remains that the coronavirus pandemic has impacted everyone in all walks of life, perhaps even having a permanent reshaping effect in some areas of society. The buy-to-let (BTL) market may well be one of these areas that sees long-term change, as both tenants and landlords’ needs, wants and circumstances have been shaken up by the events of the last year.

22

BUY-TO-LET INTRODUCER

APRIL 2021

The stamp duty holiday has also had an impact, helping to stimulate demand and activity in this market.

Indeed for many, the past year has seen landlords given the support and stimulus, and at the very least space to breathe, that they have sorely lacked in recent years.

Experts from OneSavings Bank (OSB), Zephyr Homeloans, LendInvest, Landbay, Hampshire Trust Bank (HTB) and The Mortgage Lender came together to discuss the impact of the pandemic on the market, and what measures are being taken to ease concerns among renters.

RESILIENT LANDLORDS During the COVID-19 pandemic, across the board as well as in the BTL market, lenders were forced to shut or retrench to protect against the uncertainty

www.mortgageintroducer.com

PANEL

MARKET that lay ahead. Lockdowns and restrictions have endured far longer than most initially expected, and the repercussions were more serious than first thought.

Nevertheless, Andy Virgo, director of buy-to-let at LendInvest, notes that the BTL market performed better than expected over 2020, and that 2021 will only see activity grow.

He says: “There are a number of resilient landlords out there who will be gearing up for an assault once the stamp duty holiday reaches its conclusion. Lenders have begun to return to the market and are reintroducing high [loan-to-value (LTV)] buy-to-let products.”

Virgo also notes that LendInvest has received interest from overseas investors, and it has secured a funding line with JP Morgan, which will assist in supporting the return of investors to the buy-to-let market.

He adds: “I think there is a lot of confidence in the buy-to-let market right now, from both investors as well as lenders.”

Steve Griffiths, sales director at The Mortgage Lender, explains that there was an immediate impact felt when the pandemic started, caused by the restrictions on in-person valuations. However, he adds that landlords returned to the market surprisingly quickly following the first lockdown.

Meanwhile, OSB recently released an interim report which notes that the lender is near to returning to prepandemic lending figures. Adrian Moloney, group sales director at OSB, says that the funding for non-bank lenders came back quickly.

He adds: “Landlords are a resilient group, this is now the second time the market has been stress-tested, the first being during the financial crisis. Looking back on that crisis, buy-to-let recovered quicker than the residential market.”

Paul Fryers, chief commercial officer at Zephyr Homeloans, builds on this point about the robust

“There are a number of resilient landlords out there who will be gearing up for an assault once the stamp duty holiday reaches its conclusion” ANDY VIRGO

www.mortgageintroducer.com

“The demand for buy-to-let mortgages is there and the ability for lenders to be able to keep up with this is strong” PAUL FRYERS

nature of investors: “Those within the BTL market were less likely to, and indeed took less mortgage payment holidays.”

He adds: “On the funding side, the securitisation for specialist buy-to-let mortgages has continued throughout last year.

“The demand for buy-to-let mortgages is there and the ability for lenders to be able to keep up with this is strong.”

A NATION OF RENTERS In 2020, government statistics showed that 4.6 million (20%) of the 23 million households in England were renting from a private landlord.

As a result of the pandemic, there appears to have been a nationwide shift in perspective regarding renting.

As finances are disrupted and criteria tighten, people of all ages and demographics who might previously have been prospective first-time buyers are coming to terms with the practical fact that they may rent for longer, or even permanently.

Charles McDowell, managing director at HTB, says: “We have gone from a nation of homeowners to being a lot more comfortable with the idea of renting. I think this new mindset will continue amongst both the younger and older generation.”

This, in turn, has changed the way that renters are viewed, McDowell adds: “You are now seeing landlords looking at renters as consumers and seeking to identify where they can improve their product.

“As well as this, the [house in multiple occupation (HMO)] market, which used to just be for student lets, has shifted into a marketplace for young professionals, and the quality of housing has improved significantly to accommodate this change.”

In fact, he adds, across Europe as well as the UK it has becoming increasingly common in recent →

APRIL 2021 BUY-TO-LET INTRODUCER

23

PANEL

MARKET years for people to rent throughout their lives. This is a trend which McDowell believes will certainly continue in the UK. Due to increased demand and the view that renting is now a long-term status, rather than a brief holding pattern before homeownership, the market as a whole is improving and adapting.

Moloney outlines that the quality of rental accommodation, for example, is of a far higher standard than 10 years ago.

He says: “Nowadays, from the landlord’s perspective, the tenant is a customer who you want to retain, which means providing a high quality of accommodation.

“There is a rising trend amongst the public to rent properties rather than to own them themselves.”

MARKET PREDICTIONS Examining market trends and making predictions for the future has never been an easy task. Over the last year or so, however, it has been harder than ever to keep track of the constantly shifting sands of the pandemic, as well as issues surrounding it such as furlough and unemployment, government stimulus and support schemes, and changing tenant tastes and needs.

As we emerge from the pandemic, though, all eyes are on the future, and it has started to become easier to see where current trends and events might lead.

For example, in his Budget speech on 3 March, Chancellor Rishi Sunak announced that Corporation Tax rates will rise from 19% to 25% in April 2023. However, a new rate of 19% will apply to companies with annual profits of £50,000 or less. As this tax applies to landlords operating within a limited company structure, it has the potential to shape this market down the line.

Ian Hall, head of sales at Landbay, says: “New taxation rules will make it harder for larger limited companies; however, I do not believe they will inhibit smaller limited companies. Therefore, I expect to see a trend of a rise in the number of small limited companies.”

Rightmove recently released data that forecasts that house prices will rise by 4% in 2021, but Virgo finds this surprising, and notes that in fact, many brokers believe the extension of the stamp duty holiday has only delayed a ‘cliff-edge’ situation that will negatively affect the housing market later in the year.

Nevertheless, he goes on to say: “I believe that in the UK we can talk ourselves into a problem, so therefore I think it is important to focus on the positives, which are that there is plenty of stock to meet the demand.”

24

BUY-TO-LET INTRODUCER APRIL 2021

Taking the potential cliff-edge at the end of the stamp duty holiday into account, at which point numerous transactions may fall through as buyers back out in the face of a larger tax bill, Virgo notes that BTL landlords may actually be able to take advantage of the situation.

He says: “There are landlords building a war chest now for when that happens, with the intention to secure themselves the best deals.

“All in all, the market has made a fantastic start to 2021 from a lender, landlord and broker point of view.”

Griffiths agrees that there will be a large amount of activity in the race to beat the stamp duty deadline, and then following the deadline from investors looking to capitalise on lower asking prices.

He also points to the large number of 5-year fixed rate mortgage products maturing this year; as a result, he expects there to be a lot of renewal business available for brokers on this market later on in 2021.

Considering other future trends that might shape the market, Griffiths adds: “Working from home has been proven to be a successful approach, and therefore I expect to see further investment in technology, such as [automated valuation models (AVMs)] and desktop valuations over this year.”

In many ways, it looks to be a positive year for the BTL sector, Fryers says: “A lot of people have more money to invest as a result of the pandemic, this is through resources being closed and people no longer having to pay for travel into work.

“Overall, there is a positive feeling within the market, and at Zephyr Homeloans we have seen a significant rise in the number of first-time landlord enquires since the start of the year, which we expect to continue.”

However, it is still hard to predict at this point what the fallout will be later in the year. At the moment, even though many in the population have been negatively affected, the full impact of the pandemic has been

“Over the past 12 months the mortgage market has stepped up to support homeowners over the course of the pandemic” CHARLES MCDOWELL

www.mortgageintroducer.com

PANEL

MARKET ameliorated by government support schemes, such as furlough.

McDowell warns: “Looking ahead, the big unknown is what will happen once restrictions are lifted and government support is removed, I believe once we reach this, we will be in for a difficult time.

“However, it appears clear that the government intends to continue providing support until it can remove it without a significant negative impact.”

FEAR OF HOMELESSNESS Homelessness charity Shelter recently revealed that one in seven adults in England – more than six million people – are increasingly worried about becoming homeless as a result of the pandemic.

On 10 March 2021, Housing Secretary Robert Jenrick revealed that the ban on residential evictions was to be extended from 31 March 2021 to 31 May 2021.

No evictions can take place during this time, unless the matter falls under the definition of an exceptional case. However, there are many for whom financial difficulties will last longer than this, and who may have fallen into rent arrears or debts that will be hard to climb out of in time.

This is, of course, affecting landlords in their turn, particularly those who rely on rental income for the bulk of their own living costs or to repay mortgages.

Virgo notes that the pandemic has particularly affected certain demographics, such as those employed in hospitality, which in turn largely rely on the private rented sector.

He says: “The hospitality sector has undergone serve financial hardship, as under the lockdown restrictions it has been forced to close completely.

“At LendInvest, we work with landlords to support them with their financial troubles as a result of this impact, which has seen landlords and tenants struggling.”

McDowell agrees that, so far, the mortgage market as a whole has made a point of taking these issues into account and providing support systems where possible.

He says: “Over the past 12 months, lenders have stepped up in terms of supporting the economy, and the mortgage market has stepped up to support homeowners over the course of the pandemic.

“This has been done through mortgage payment holidays, which directly benefit homeowners and indirectly benefit those who rent properties where the owner has required a payment holiday.”

www.mortgageintroducer.com

“There has been a rise in the number of HMOs. This is accountable to landlords looking to increase their yields, as well as buying larger properties” IAN HALL Moloney adds: “We as lenders all stepped up to support the individuals and the industry through methods such as payment deferrals.

“What we are now seeing is the number of people receiving payment deferrals or requesting them has diminished, which shows you that people are able to pay their mortgage again.

“However, I do think some people are going to have to sell their properties as a result of the financial hardship they have faced due to the pandemic, which means having an active rental sector is more important than ever before.”

Virgo points to the extension of the furlough scheme, which Sunak extended for all sectors until 30 September 2021, with employer contributions gradually increasing from 1 July.

The hope is that this will provide many struggling renters with continued support until industries such as hospitality and retail can return to some semblance of normality.

Indeed, Moloney believes that the scheme is likely to be extended even further, stressing that it is essential that the government ease the population out of this crisis and support them back into their jobs, rather than creating a cliff-edge.

Griffiths believes that through the vaccination programme, people will quickly be in a position to return to normal and start to recover financially.

He explains: “This is very different from the financial crisis; once everyone has been vaccinated, normality will likely return very quickly, which will see people regain jobs and be able to continue their usual payments.”

Griffiths adds: “I believe there is a responsibility from the private rental sector [PRS] to diversify portfolios, so there is more choice at the lower end of the market for people that can only afford that type of property.” →

APRIL 2021 BUY-TO-LET INTRODUCER

25

PANEL

MARKET As well as this, Griffiths believes that the Tenancy Saver Loan and the Tenant Hardship Loan are a step in the right direction, but more needs to be done across the entirety of the UK. Government data shows that around 49% of hospitality workers and 36% of retail workers are currently renting.

Therefore, Fryers notes the importance of the furlough scheme and agrees with Moloney that a gradual easing is required in order to avoid negative repercussions for hospitality and retail workers, who are some of the most affected by the lockdown restrictions.

EVER EXTENDING GAP The gap between the maximum and minimum loan available to buy-to-let mortgage applicants has reached £214,466, according to Mortgage Broker Tools. The average maximum loan is £346,153, while the average minimum is £131,687.

Meanwhile, the gap between the maximum and minimum loan available to residential borrowers is lower, at £99,475.

Griffiths says: “In the past the way to assess buy-tolet affordability was simple, it was always 125% of 5%; however, now there are more than 100 different ways and it has become far more complex.”

He goes on to explain that there is a significantly higher number of factors to take into account when assessing buy-to-let affordability. He points to a customer’s tax status, ownership structure, pay rate and nominal rate, adding that this added number of assessments has been brought about by increased regulation in the sector.

Hall says: “This new approach to assessment has become the norm, which does provide the lender with added clarity on a customer’s application.”

Virgo adds that Lendinvest, as it is not regulated by the Prudential Regulation Authoruty (PRA), can still use the previous, simpler stress tests, and that: “As a result of the increased regulation across the market, it has never been more important for brokers to know their lender.”

Looking towards lending standards, Fryers says: “The performance of buy-to-let business is very strong, and lenders have been more discerning on lending, which points to there being great product reach in the market.

“Buy-to-let is an investment and with any investment there is a risk that it will go down, but equally there is the chance that it will go up” STEVE GRIFFITHS

26

BUY-TO-LET INTRODUCER APRIL 2021

“I also believe that the difference between standard buy-to-let and specialist buy-to-let has increasingly diverged over the course of the pandemic.”

INCREASING CGT Benham and Reeves estimates that landlords could see the Capital Gains Tax (CGT) owed increase by £24,000 if recommendations by the Office of Tax Simplification to change the threshold are introduced.

Currently, the rate of tax is 18% for basic rate taxpayers and 28% for those in the higher rate threshold, with tax exempt on the initial £12,300.

The Office of Tax Simplification has called for CGT to increase in line with income tax rates, to 20% at the basic rate and 40% at the higher rate, while also lowering the initial amount exempt to £2,000.

Nevertheless, while these changes may deter some investors from focusing on the BTL market, Moloney does not think the impact will be severe.

He says: “CGT is only payable on the disbursement of assets, so it depends on how long an individual intends to hold them. Buy-to-let is an investment and people change their investment strategy based on their returns.

“There have been many changes in regulation and rules over the last five years, which has not damped the buy-to-let market. The market is geared towards professional landlords and I do not think this potential rise in CGT will significantly disrupt the marketplace.”

Fryers agrees, explaining that the market is focused on professional landlords making a long-term investment, and therefore the changes in CGT will not drastically affected the general market.

He says: “Some landlords with just one or two properties may view the changes as a reason to sell and leave the market. However, this is expected to remain at the lower end of the market.”

Benham and Reeves found that, in the last decade, the average UK house price has increased from £168,703 to £251,500, which means the capital gain of a second home or BTL investment during that time is £82,798.

Based on this example, and when removing the exempt sum of £12,300, a sale in the current market would see a lower rate taxpayer pay £12,690 in CGT, while a higher rate taxpayer would pay £19,739.

However, should the proposed changes come into play, the amount owed would rise to £14,100 for a basic tax rate payer, and £28,199 for the higher threshold.

McDowell believes that these changes will lead many landlords to consider the benefits of retaining a rental property and benefitting from the income generated in rent, rather than selling it on and making a profit that way.

He says: “Ultimately tax simplification is an incredibly honourable thing, the UK’s tax code is embarrassingly long, and it is growing in complexity. More complexity means more compliance, more ability to avoid, and it pushes up the overall cost to the economy.” www.mortgageintroducer.com

PANEL

MARKET McDowell goes on to say that with this tax change, as with most, there will be winners and losers, but that with CGT an individual pays a relatively low amount in comparison to income tax.

Virgo says: “I believe an avenue to go for landlords is investing profits in further purchases instead of paying tax on their profits. Landlords are resilient and they will find a positive solution around any hurdle.”

REGIONAL DIVIDE One of the most striking effects of the pandemic has been the changing dynamics and priorities across the country. For example, as home working becomes the norm – potentially for the long-term – demand for housing close to Central London hubs has dipped.

In addition, as renters and owners alike have remained locked down in their houses, many have realised an increased need for room, both inside and out, and access to green spaces.

These shifting preferences will affect both the PRS and the wider housing market in various ways, and the impact is already being seen.

Data collected by the Office for National Statistics (ONS) shows that rental prices grew by the largest margin in the South West in the 12 months to February 2021, up 2.3%.

This was followed by the East Midlands at 2.2% and the West Midlands and North West at 1.9%.

In contrast, rental prices in London rose by the smallest amount, up 0.8%.

Fryers says: “We have seen a greater increase in rental prices for larger properties, which demonstrates the change as a result of the pandemic.

“People now want larger homes in order to include a home office, a garden, and more space generally due to working from home.”

Zephyr Homeloans research shows that detached properties increased by just under 3% in rental prices, whereas for flats prices rose just 1% over the last year.

Virgo adds: “We at LendInvest have seen the shift from tenants to move out of London.

“This is fuelled by companies which have told their employees that they no longer need to return to the office, or have provided the option of remote working.

“From the bridging side, we have seen people looking to their HMO properties and altering them by joining rooms together and turning them into a multiunit freehold flat, to provide larger accommodation to attract people.”

Hall says: “There has been a rise in the number of HMOs appearing in areas which previously were purely residential, which is accountable to landlords looking to increase their yields, as well as buying larger properties.”

However, not everyone thinks that these represent permanent changes.

For example, Moloney says: “As you start to see lockdown restrictions ease and city life become available and accessible to everyone again, I believe www.mortgageintroducer.com

“Nowadays, from the landlord’s perspective, the tenant is a customer who you want to retain, which means providing a high quality of accommodation” ADRIAN MOLONEY there will be a resurgence in London and other cities across the UK.” He adds: “From what I have seen, landlords tend to stick to renting properties in areas they know and have let for a long time, therefore I do not think the pandemic will create as great of a shift away from London and the southern rental market as is believed.”

Virgo also points to the number of foreign workers who have returned home due to the coronavirus pandemic, saying: “Once these workers filter back into the UK, I believe the rental market in cities will tick up in demand.”

RISKY BUSINESS Research conducted by the National Residential Landlords Association (NRLA) has found that more than 800,000 renters in England and Wales have built arrears since lockdown measures started in March last year.

Without government support, the association fears that many landlords will simply be unable to continue providing much-needed housing in the private rented sector, as it is too high risk.

To counter these concerns, Virgo believes that the importance of brokers in the market is essential, so that consumers can receive the correct advice and make good decisions as to how to move forward in the current climate.

Fryers also points to the importance of understanding and being up to date with current regulation and tax implications.

Griffiths says: “With increased regulation, consumers are better protected now from the risks associated with buy-to-let.

“Buy-to-let is an investment, and with any investment there is a risk that it will go down, but equally there is the chance that it will go up.”

Overall, despite the risks and potential pitfalls, the sentiment is positive, with the general consensus being that the BTL market will remain strong, providing much needed housing to those for whom the pandemic has made homeownership a much more distant prospect.

Looking ahead, the panellists believe that the resilience of landlords will prevail, and the market will ultimately bounce back to pre-pandemic levels. BTL I APRIL 2021 BUY-TO-LET INTRODUCER

27

SPOTLIGHT

HAMPSHIRE TRUST BANK

Here to serve Buy-to-let Introducer speaks with Marcus Dussard, sales director, and Charles McDowell, managing director, at Hampshire Trust Bank (HTB) to discuss the lender’s role in the market, approach to talent, and plans for the future How did HTB adapt to working in the pandemic?

Marcus Dussard: Well that’s a question for our brokers, but in my view, I’m really proud of how we have handled the past 12 months. The key thing for us was to remain open, transparent and honest with all our brokers about what we were doing. There was so much uncertainty in the market and as a lender we thought that one of the right things to do, for both the Bank and the borrowers, was to reduce loan-to-values (LTVs).

The senior members of the team were involved in all of our broker conversations over that period – and those are never easy conversations. But our brokers are partners and once we explained what we were doing and why, we generally got to a good point.

The next point was when the market started to turn. As soon as that uncertainty lifted we moved really quickly with it, and we were back up to our full offering as soon as anybody.

You can’t please everyone, but in terms of how we dealt with it the feedback was brilliant from our brokers - it isn’t always what you do, it’s how you do it that can really set up apart.

Charles McDowell: As a lender in those situations, often people are cynical of your motives that we are just here to protect the Bank, but we are also looking out of the borrower - it’s about finding what’s best for all parties. We’ve had borrowers come back and say, “I’m so glad you suggested this, as otherwise I’d be in more difficulty.”

I really am a huge believer in the idea that we are servants to the economy - to industry, small businesses, entrepreneurs and property investors. When you look at the last crisis, that was caused because bankers became masters of the economy, when actually we are

28

BUY-TO-LET INTRODUCER APRIL 2021

here to serve. Yes, we’re here to profit, but I think over the last 12 months, lending and banking as a whole has really stepped up to the plate when the economy needed us to – we did what we could to take at least some burden off people during what was an incredibly difficult period.

What does HTB stand for in the world of specialist finance?

CM: It’s about going back to basics, because what we do is get the right people in the room – we get great people and we empower them and let them flourish.

One of the beautiful things that we do at HTB is that we don’t have a set plan that says what our structure needs to be. Instead, as and when talent is identified, we find a role for them. It’s like a sporting team – the teams that are consistently at the top are always looking for someone that is going to make them collectively better, and that’s what we’re trying to do.

Once an organisation gets to a certain size, you’re going to have a bell curve of performance, but we are small enough that we can really skew that distribution to make sure that the majority of our people are high performers, and are talented and driven and want to do well.

MD: We hire talent in the first place, but promotions from within are where we do our best stuff. That way they understand the mindset of HTB – they understand how we do things. That promotion from within is the perfect blueprint for working in this environment.

We want to be the go-to bank in all our chosen fields, so we always try and improve, enhance our proposition, look at different ways to do things. We listen to our brokers, and that to me is key. People come to me with ideas all the time and we try and implement them. www.mortgageintroducer.com

SPOTLIGHT

HAMPSHIRE TRUST BANK

Marcus Dussard

We look at every case on an individual basis and try and be pragmatic. We can’t say yes to everything, but it goes back to that partnership we have with our brokers.

HTB launched its lowest ever 5-year rate last year, what plans are in the pipelines for adapting your product offering to changing demand this year?

CM: I’m always sceptical about ‘product innovation’ because I would never have said that launching the lowest ever 5-year rate was an innovation – it’s just taking advantage of the market and the low funding costs, which we looked to pass on to the right type of borrower.

Ultimately, a mortgage is a mortgage. I think innovation will come through re-combination and evolution (as opposed to something brand new).

For example, there’s our 5:2 product, which is the 5-year fix with the 2-year early repayment charges, or our refurb in term, which allows people to do a light refurb and still move onto the term product. The next thing may be an evolution of this product which allows a heavier refurb to happen at the initial stage www.mortgageintroducer.com

Charles McDowell

and allow some cash out once the refurb is done and it is flipped onto a term piece. That being said, over the next 12 months much of our investment is around service and delivery.

MD: We’re not trying to reinvent the wheel, but it’s about the criteria and those little nuances that you can find on a case-by-case basis to get someone to the right result, and ultimately to get us to the right result and protect us as well as a bank.

CM: One of the product innovations that I’m most proud of is our holiday let product. How we look at holiday lets is cooler than how anyone does it across the market – and it sums up what HTB is all about in many ways. It doesn’t get talked about very much because it’s a small, micro, maybe even a nano niche, but we go to local letting agents and get information about the high, medium and low seasons with variable occupancy rates – data points which are specific to that actual locality. How we assess a holiday let in the Lake District will be completely different to Cornwall or Central London.

APRIL 2021 BUY-TO-LET INTRODUCER

29

SPOTLIGHT

HAMPSHIRE TRUST BANK Marcus, you joined early in the pandemic, how was it to join a team at this time, and how have you found it at HTB? MD: I spent a lot of time before joining working out what my first 90 days were going to look like. It all centred around meeting brokers, explaining what HTB does and finding out what they thought of HTB – being someone new and in the position where I could make changes where we needed to, I wanted to hear it from the horse’s mouth.

That obviously all went up in smoke pretty quickly – luckily I’d met all of my team, so coming into the environment was really easy. However, my job is about being able to solve problems. For that, you need to know the operations team, lending managers and underwriters, and obviously I didn’t have that. I was trying to find that rapport with people over Zoom, which is more difficult, no matter what anyone says.

The sooner our BDMs can get back out on the road, the better for everyone.

My style of management is about rapport – I’m about getting someone to do something because they want to. So, it was a difficult period, but everyone made it extremely easy for me to adapt – when you’re working with great people, it’s easy to adapt.

What trends have you seen in the market recently, and how do you expect them to change?

CM: The market is doing really well – it’s incredibly buoyant. What we are seeing is a move towards higher yielding assets, and more certainty around rental flows.

An increasing portion of people want to get into semicommercial, houses in multiple occupation (HMOs) or holiday lets to diversify their income sources. Which makes sense given the potential uncertainty we are facing.

MD: We have seen some developers changed the way they see things – like holding onto properties they maybe wouldn’t have in the past. So, something like our development exit product, and that flexibility in our approach to looking at development exits, is a trend I see continuing over the next 12 to 24 months.

CM: We are also seeing movement out of central London. London is experiencing rent yield pressures – some areas are down 20% year-on-year – which obviously has a significant impact on the valuation, but also on the rental flows and therefore the affordability of the loan. That being said, I’m confident London will bounce back. I don’t think it will change as much as we think it will – I’m sceptical of the idea that this last 12 months has been a shock which will completely change how the economy runs.

We are really pleased with how we’ve adapted to the pandemic and working from home, but I am

30

MORTGAGE INTRODUCER APRIL 2021

bursting to get everyone back into the office as soon as it’s appropriate and we can make sure it’s all done correctly. By all means, if you’re one of the big banks with many hundreds of people, you can change your operating model and have some sort of hybrid, but I really don’t think that in our sector, particularly the more complex specialist end, we can make it work.

So, I do think there’s going to be a rush back to the offices, and everything that comes with that: people will want to live closer to work, will spend their lunch times in cafes and their evenings in pubs, restaurants and theatres.

Semi-commercial is clearly a key topic, can you talk us through your offering there?

CM: If you look at the larger banks, they’ve got commercial divisions that would never look at an asset of the size we do, it’s just not big enough. Then, you’ve got residential divisions, which just don’t have the ability to look at a commercial asset. There’s a real underserved segment, which is semi-commercial.

We understand the property, both residential and commercial – we can look at it as a whole, all the risks and benefits. We look at all types of assets and, providing the commercial tenant is a strong tenant, we can take that into consideration and that helps from an affordability point of view.

The difficulty is, who knows what a strong tenant is these days – it’s very hard to tell. Being able to look at them and understand how they are trading, how they have coped with the last 12 months, and take that into consideration is really important.

MD: It’s really about how we have adapted through the period. Did that semi-commercial property come through the pandemic in the way we would have expected? If yes, we would lend to that client. That has been the major positive for us, the ability to adapt and be flexible.

What are the plans for HTB over the next year?

MD: For 2021, a period of stability would be great for everyone – that’s what we’re all looking for, particularly buy-to-let investors, with all the changes they’ve had to endure over the last few years.

My job is to continue to get sales and meet our targets, which are going to grow over the next 12 to 24 months, and it’s going to be about having a period of stability looking forward.

CM: The plan for the next 12 months is to continue supporting our brokers and our clients, and continue on our growth trajectory.

We want to do the same, but more, better and faster.

We continue to have very ambitious targets and growth plans, and we are really well set to achieve them. BTL I www.mortgageintroducer.com

T H U R S D AY 2 4 J U N E 2 0 2 1 | O N L I N E V I S I T W W W. S F I A W A R D S . C O . U K

WITH THANKS TO