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Buy-to-let Watch: Prepare to be quizzed

Buy-to-let lending is shrinking.

In 2017, the overall lending figure is likely to sit at around £35bn. That’s about a 14 per cent reduction on the year before.

In 2018, I reckon we will see the market shrink further, maybe by another 11 per cent, so that by the end of the year the final tally will reach £31bn at best.

Clearly the fiscal and regulatory measures designed to curb buy-to-let lending are working. And my gut tells me that as a proportion of the whole residential mortgage market, no more than 15 per cent is probably about right.

For brokers who focus on BTL you might think that that a smaller market could have a detrimental effect on business. Here at Mortgages for Business, we see things somewhat differently. In fact, we see the smaller market as a distinct opportunity and have plans to expand our buy-to-let offering in 2018 with particular and continued emphasis on the specialist sector.

For those of you who are not overly familiar with buy-to-let, the specialist end of the market caters to landlords with more complex borrowing requirements. By this I mean landlords…

  • With four or more distinct mortgaged buy-to-let properties- what the PRA now defines as a “portfolio landlord”
  • Borrowing via limited company structures – such as Special Purpose Vehicles and trading companies
  • Needing finance for non-standard property – including HMOs, multi-units and mixed-used properties, as well as commercial property
  • Wanting to finance entire portfolios in one go, rather than one at a time
  • Landlords who develop property for rent – either build to rent or buying existing properties which require renovation or conversion

I’m not saying it’s going to be easy. Far from it. I think it will be an extremely challenging year. But we have very strong relationships with the specialist BTL lenders and we work hard to understand exactly what their lending criteria means in practice for our landlord clients.

And landlords with complex borrowing requirements are a savvy bunch. Despite the anticipated contraction in the market, a large proportion of our existing clients tell us that they intend to expand their portfolios in 2018. These clients expect us to know, from memory, what each lender will and won’t do.

Sometimes it can feel like being a contestant on Mastermind…

Your name please? David Whittaker.

Your occupation? Specialist buy-to-let broker.

And your specialist subject? Specialist buy to let lending criteria.

Right! You have 90 seconds on your specialist subject, starting now.

Which lenders cater to all the specialist scenarios listed in the bullet points above?

How many specialists will accept HMOs with more than eight bedrooms?

What SIC codes are acceptable to buy to let lenders considering applications from landlords using SPVs?

Which lenders will accept trading limited companies?

If there is fixed and floating charge already in place on a portfolio owned in a limited company, which other buy to let lenders will still consider lending?

When do the new EPC rules come into play for landlords issuing new AST agreements?

Which lenders will consider flats above food takeaway outlets?

Which lenders don’t take a fixed and floating charge over a trading limited company?

Which lenders will accept a landlord’s own portfolio spreadsheet?

When submitting a buy to let application from a portfolio landlord, which lenders require a business plan and cash flow forecast?

You’ll notice that I haven’t supplied the answers. After all who doesn’t like a quiz? I would like to think that all the brokers on our buy-to-let desk, know the answers to all of these questions. And more!

The point is, if you don’t know the answers and you intend broker complex buy to let deals, you need either to do your homework quickly or work with a broker who can place the deals for you. And that’s where we come in…

David Whittaker is chief executive of Mortgages for Business

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