With the buy-to-let market six months on from PRA changes around portfolio landlord borrowing, how are mortgage brokers finding the sector? Mortgage Strategy carried out a survey to find out…
Alastair McKee, Managing director, One 77
Since the changes we’ve not had a drop off in terms of volumes. Our business has typically been around 20 per cent for buy-to-let, and that continues to be the case.
I think the market from here on in will be dominated by brokers that arrange buy-to-let and those that don’t, due to the complex underwriting requirements/business plans/cash flow forecasts which many brokers won’t have the experience of, the time to deal with or perhaps the inclination to research and process those applications.
The market has still not adjusted to the changes; the majority of landlords out there are still oblivious to the tax changes and rule changes.
Aaron Strutt, product and communications manager, Trinity Financial Group
The combination of regulatory and tax changes have affected our business levels and we are not submitting as many new purchase buy-to-let mortgages any more.
Our brokers are not helping as many first-time landlords or experienced investors to extend their portfolios – but we are arranging a lot of buy-to-let remortgages and helping more first-time buyers.
The stress test changes have made the buy-to-let market incredibly complicated, and brokers need to do their research to ensure clients get the best rates.
There is a lot of confusion in the buy-to-let market and it is going to take some time to get used to all of the changes as they filter through. Unfortunately, many accountants do not seem to understand the tax changes, and lots of landlords do not know exactly how they will be affected.
David Hollingworth, associate director communications, L&C Mortgages
The buy-to-let market has sustained such a large amount of change in a relatively short space of time that it’s hard to pin down the impact of any one change in isolation. Lenders have been quick to evolve and tweak criteria in response to the initial tighter rules whilst also developing their proposition for portfolio landlords.
An initial concern was that lenders would step away from offering an option to portfolio landlords, but although some have distanced themselves, many have affirmed their commitment to professional landlords. They have also generally sought to make the changes as easy to deal with as possible, some employing technology to aid the process, for example.
As much as brokers and lenders will have to adapt to the new approach for portfolio landlords, it will also take some time for landlords themselves to readjust to the more robust documentation and evidence required of them.
John Phillips, group operations director, Just Mortgages and Spicerhaart said:
Buy-to-let is a lot more challenging for brokers since the PRA changes. Gone are the days when you could just pull out a calculator and work out how much a landlord could borrow; now it is a case of having to gather a huge amount of additional information on the landlord’s property portfolio as well as their business plan and cashflow statements, before you can even start to think about LTVs.
For brokers who only occasionally deal with clients with portfolios of properties, the extra information required can seem as incomprehensible to them as it does to their clients, and for many, this is putting them off dealing with portfolio landlords altogether.
Liz Syms, chief executive, Connect for Intermediaries
Many brokers do not fully understand what is required since the PRA changes came in, and this is putting them off dealing with portfolio landlords, while others who do understand are put off due to the additional paperwork, extra work and time needed.
Another issue is that there is no standard format for portfolio, business plan and cashflow statements, so not only are brokers having to gather all this additional information, but they then have to produce it separately for each lender, which takes even more time for no further gain.
Specialist networks and packagers can help and take some of the pressure away – just knowing which lender accepts what can make a huge difference.
David Whittaker, chief executive, Mortgages for Business
Landlords are generally getting on with it, either in ignorant bliss of the situation or in full knowledge. The market is still absorbing the changes.
Three quarters of landlords aren’t affected by the portfolio landlord rules: until they reach their fourth property they are not impacted – it is only once they cross that threshold that they know about it and are impacted.
Ying Tan, managing director, Buy to Let Business
It’s important that brokers manage clients’ expectations, especially in the short term as lenders continue to get to grips with the increased amount of information required to assess affordability.
Brokers can also help move the process along by ensuring they are as thorough as possible when submitting applications.
Adele Turton, Managing director, Manchester Money
I haven’t noticed a drop in the number of applications that I am receiving from my existing clients but I think that there are less new investors.
BTL has received a lot of criticism and ended up with a tarnished reputation.
Thankfully the majority of landlords operate in a professional manner and treat their portfolios like a business. They “know their numbers” and use sensible investment strategies, ensuring they can provide good quality homes for their tenants at market rates. PRA will force everyone to treat their portfolio as a business, this can only be a good thing.