In 2017 buy-to-let lending totalled £34.9bn, according to UK Finance, the body that has replaced the CML.
But is that the real figure? UK Finance asks for purchase and remortgage numbers and values, but we don’t know the reporting parameters that each lender sets itself for extracting the data.
For example, do lenders include product transfers in their remortgage data? In the past, one could have argued that it didn’t matter either way because these products probably accounted for less than 2 to 3 per cent of the overall figure. These days, however, we have seen a rise in the popularity of product transfers and, according to our management information, last year they accounted for 5.2 per cent of our BTL business — up by 40 per cent on 2016. If some lenders aren’t including product transfers when reporting to UK Finance, it’s mildly irritating.
Looking ahead, we expect the product transfer market to grow further, for a number of reasons: up-front costs are usually cheaper for the borrower because there are no valuation or legal fees, and completion fees are often reduced; the process is much quicker for the borrower than refinancing away; and they work well for potential mortgage prisoners in a post-PRA SS13/16 Part II world.
While this may be good for landlords, however, the same can’t be said for brokers. We’ve found that some lenders, supposedly intermediary only, have been writing directly to borrowers to offer the option to transfer — and thus bypass us, the introducing broker. So, when we contact the client about remortgaging or transferring, if the product transfer proves the most suitable option, the client says: ‘I’m happy to let you have the business as long as you don’t charge me a broker fee, because I can avoid your fees if I go to the lender directly.’ What else can we do but acquiesce?
Add to the mix the fact that lenders pay a lesser proc fee on product transfers (except BM Solutions) and it’s clear that we have to write several times more business just to maintain the status quo.
It would be good to understand more of the detail on BTL lending, not least because it would give us a better idea of the direction in which the market is heading. We all know it’s becoming more specialist, but how? Perhaps more importantly, it would be useful if HMRC and the PRA knew too.
Greater transparency would serve us all well.
David Whittaker is chief executive of Mortgages for Business