2018 will see a shake-up of Mortgage Strategy’s quarterly lending survey, with our decision to alternate the subject each quarter between residential business — our sole focus to date — and the buy-to-let market.
So, as BTL lending comes under our microscope for the first time, and some of our panel members alternate too, we ask: which lenders brought the right chemistry to the market during the past quarter, and whose practices nearly sent them up in smoke?
Godiva Mortgages (Coventry Building Society)
Godiva Mortgages seized the top spot in our inaugural BTL lending survey, displaying all the right elements. Mortgages for Business chief executive officer David Whittaker describes it as “top of the class for non-portfolio landlords”.
The lender also scored the best marks for service, with Personal Touch Financial Services head of propositions Victoria Jefferies calling it “consistently excellent”. John Charcol managing director Walter Avrili commends Godiva’s “great support” and easy-to-understand website and criteria, while Large Mortgage Loans managing director Richard Merrett thinks its flexible products, with competitive rates and no ERCs, are “unique”.
Although brokers are fans of Godiva’s rates, Trinity Financial product and communications manager Aaron Strutt says: “It’s a shame its best mortgages are for landlords with a 50 per cent deposit.”
BM Solutions debuts with a creditable second position in our survey, with Avrili praising its BDM, Nick Jury, in particular.
London & Country associate director of communications David Hollingworth applauds the lender for being quick to develop its criteria after the recent ructions in the market, saying it is “always prepared to fight on price”.
However, some members of our panel think BM Solutions’ proposition is missing certain key compounds. Perception Finance managing director David Sheppard says the lender’s surveyors tend to be “sceptical” regarding rental amounts. “We often have to find an alternative option post valuation,” he says.
Chadney Bulgin mortgage partner Jonathan Clark commends the lender’s online proposition but not its “clunky” manual underwriting. Whittaker, meanwhile, thinks it is “still struggling with its limited portfolio offering”, and Buy to Let Business managing director Ying Tan would like the lender to lower its product transfer rates.
Santander for Intermediaries
The panel put Santander third overall and welcomed its clinical approach. The lender does not accept portfolio landlords but Clark says its products and service on straightforward cases are “among the best out there”.
Hollingworth agrees. “In terms of offering keen, straightforward rates and rapid servicing, it ticks a lot of boxes.”
Sheppard also welcomes Santander’s common-sense approach, saying: “It keeps the required documents to those that will assist with decision making.” He adds that the lender is a good option for pound-for-pound remortgages and five-year fixes. Merrett agrees, commending its “extremely positive” criteria on like-for-like remortgages.
While TMW came a solid fourth in our survey, some of the panel feel its service lacks energy. Clark says: “TMW’s initial submission process is slick but its service standards have come under pressure.”
Processing times can be “very slow”, adds Sheppard.
Merrett, however, thinks TMW is an “excellent option for those unable to demonstrate the minimum personal income levels required by other lenders”.
Strutt says his firm’s brokers have been “really impressed” with the lender’s product transfer service, while Hollingworth welcomes the piloted return to limited company lending.
Godiva is top of the class for non-portfolio landlords
In fifth place for the quarter, Kent Reliance has gained favour for its specialist approach. Clark says the lender’s service has improved and its criteria enable advisers to place more complex cases for their “less price-sensitive clients”.
Whittaker thinks Kent Reliance leads the specialists in portfolio lending and underwriting, while Merrett says it is “superb at a wide range of specialist cases and has an excellent BDM team”.
Hollingworth calls it one of the go-to lenders for professional landlords, adding: “It works hard on its education for brokers.”
Paragon came sixth in our first BTL survey and has had an eventful start to the year. Whittaker says: “It has been fighting for market share and been more proactive in underwriting.” He feels its floating charge modification in Q1 will be a “game changer”.
Hollingworth says that, despite the lender’s Q1 changes, it is “business as usual”, while Sheppard praises its BDM.
He adds: “Underwriting can be slow but they generally get to offer in time.”
Merrett commends the lender’s “good all-round set of criteria that demonstrates its understanding of the requirements of clients in this market”.
Despite its seventh position in our lender survey, Virgin’s adaptable approach has kept the pot bubbling for brokers. Merrett says: “The flexibility provided by the underwriting team when certain aspects do not quite fit criteria is extremely positive.”
Virgin Money’s fee options offer landlords choice, says Hollingworth, but he adds: “Hiking some of the stress rates after the base rate increase won’t make life easier.”
Sheppard welcomes the lender’s active approach to helping pound-for-pound remortgage customers by looking at a better rental stress test. He adds: “It will also consider disposable income in some cases for those that do not fully fit.”
Precise’s inventive approach won it fans during the quarter but its survey scores put it down in eighth place. Its service is “playing catch-up”, according to Whittaker.
Nevertheless, Clark describes Precise as “the go-to lender for many limited company applications”, while Merrett says it “excels at larger loans” and regularly comes up with good products, allied with flexible criteria.
Hollingworth praises the introduction of top slicing, while Jefferies rates the Precise sales team, who “work tirelessly to provide education to the marketplace.”
Some of the panel were puzzled by RBS’s criteria this quarter. Clark says, although the lender’s rates are very competitive, its criteria can be vague and seem to be applied “inconsistently” depending on the underwriter.
Sheppard thinks the attempt to move to affordability-based lending has not gone well. “It is likely to decline more business as a result of this,” he says.
Hollingworth feels it is hard to directly compare lenders when some are higher volume and others are specialist, but Fleet’s alternative approach caught the panel’s eye this quarter.
“Fleet may not be priced to compete on a straight remortgage but it offers an alternative in criteria and on specialist requirements like limited company,” he says.
Merrett thinks it is useful “to have an option that retains a lower pay rate assessment amid all the interest cover ratio changes last year”, while Strutt likes Fleet’s “decent” criteria and its offering of one of the lowest rental calculations on the market, regardless of tax status.
Trial and error
Many lenders are still in the experimental stage when it comes to finding the right components for their BTL offering, in some instances targeting opposite ends of the market. The next six months or so should prove an interesting time in the sector.
Walter Avrili: Managing director, John Charcol
David Hollingworth: Associate director of communications, London & Country Mortgages
David Whittaker: Chief executive officer, Mortgages for Business
Ying Tan: Managing director, The Buy to Let Business
Aaron Strutt: Product and communications manager, Trinity Financial
Richard Merrett: Managing director, Large Mortgage Loans
David Sheppard: Managing director, Perception Finance
Rob Clifford: Group commercial director, SDL Group
Jonathan Clark: Mortgage partner, Chadney Bulgin
Victoria Jefferies: Head of propositions, Personal Touch Financial Services.