What do the various buy-to-let tax and regulatory changes of late mean for your business?
Aldermore, like many of the specialist lenders, are well placed to tackle the regulatory changes in the BTL market. All mortgage applications are dealt with by our manual underwriting approach. Our experts review every application to check future tax liability, mortgage affordability and portfolio affordability – as required under the latest Prudential Regulation Authority underwriting standards.
How has your business managed to navigate these changes?
We have taken a proactive approach to the changes to ensure brokers and landlords are supported and that they understand the market changes and how they will affect Aldermore applications. We released two short guides to support the new standards: one for landlords and brokers on what the new PRA standards mean; and another for brokers with further details on changes to our processes.
We have made templates available to brokers in advance of the PRA changes to help support them so they are aware of what we will require, as well as a reference point of definitions on BTL terminology.
All our teams have been working really hard to ensure the changes are implemented as smoothly as possible so things are as simple as they can be for customers and brokers submitting applications.
Do you feel that landlords are adequately educated on the new rules?
We believe we have provided the support required for landlords and brokers with the release of our guides. However, we recognise that when portfolio landlords come to needing additional borrowing they may not be aware they will have to provide more information and affordability assessments will be more in depth.
As with any significant process change, there will be a bedding-in period while everyone gets up to speed with the new requirements. Landlords will need to rely on their mortgage adviser to guide them through the process, but I think our experts will provide lots of support to our brokers to help their landlord clients as needed.
What approach have you taken to portfolio landlord lending in light of the new PRA requirements?
We haven’t substantially changed our approach to portfolio lending as we think it is important that we provide opportunities to different types of landlord. We will continue lending to individual BTL landlords as well as landlords applying in a company name, with no background portfolio limits or limits for numbers of properties with Aldermore. It doesn’t matter what the shape and size of the landlord’s portfolio is because we review every application individually.
Of course, in line with the new underwriting standards there are some extra requirements and we will meet these by ensuring every portfolio landlord application includes a portfolio schedule and a business plan (which we’ve provided templates for). We will be testing the affordability of the portfolio as a whole and there will be an enhanced assessment for landlords with 11 or more mortgaged BTL properties with Aldermore, which will also require a cashflow forecast and a statement of assets and liabilities.
Are there opportunities presented by the new position the BTL market finds itself in?
Yes, loads of opportunities. The market is undoubtedly becoming more complex both in terms of landlords and in terms of lender solutions. Therefore landlords will be placing more reliance on their mortgage advisers and this presents the perfect opportunity for advisers to get to know their client and add real value which will lead to deeper and longer lasting relationships.
This is the age of the BTL mortgage expert and, if you are an expert, or are willing to become one, the opportunities are significant.
Charles McDowell is commercial director of mortgages at Aldermore. This article was first published in a Buy-to-Let Supplement sponsored by Aldermore and Foundation Home Loans.