Landlords feel that lenders, brokers and organisations could do more to help them respond to the new BTL landscape
My marketing department suggested some time ago that, while the buy-to-let sector was facing such upheaval, I should spend more time out and about meeting landlords and brokers.
They said not only would it be good for our brand and lead generation but, more importantly, I should do my bit to ensure the changes and their implications were on everyone’s minds.
I did as I was asked and have given presentations on the changing shape of BTL lending at a multitude of shows and conferences across the country. At each event I asked the audience about their understanding of the changes and how they had responded. At the most recent one – the National Landlord Investment Show at London Olympia on 15 June – sentiment was a surprisingly sanguine mix of acceptance and uncertainty.
Most landlords said they were no longer worried about the higher rate of stamp duty. As with every business, they had accepted that extra or unexpected costs just had to be factored in. They felt that, although hefty, the tax would not be so detrimental to landlords with larger portfolios in the long run but was likely to put off novice landlords who wanted to make money quickly.
The majority said the new regulations and tax changes had not made them want to leave the market but they felt that lenders, brokers and landlord organisations could do more to educate and help them understand how to respond.
Two subjects stood out: limited company borrowing and the forthcoming changes to underwriting standards for portfolio landlords.
Many landlords were still unsure whether they should borrow via a limited company in future. Some had not even heard of a special-purpose vehicle limited company and did not know it was the structure preferred by BTL lenders that accept limited company borrowers. Some were actually shocked (and pleased) to learn that certain lenders offered identical pricing to both individuals and corporates.
Greater numbers professed to having no idea about the new guidelines for underwriting applications from portfolio landlords, which come into play in October. They were surprised to learn the definition of a portfolio landlord had been set at such a low threshold (four or more mortgaged properties across all lenders in aggregate). They were also alarmed to hear they would be subject to much tougher affordability checks and have to provide far more detailed supporting information.
In particular, they did not know lenders would have to stress landlords’ background portfolios to ensure they were not over-committed – even for simple refinances.
I was surprised by the number of landlords who, having digested this news, came to thank me for putting them in the picture. They departed determined to get their paperwork ready and thinking about bringing forward future refinancing plans before the changes came in.
To brokers, that is an opportunity right there.
David Whittaker is chief executive at Mortgages for Business