While mortgage rates are coming down and yields are going up, there’s a general feeling that the BTL market is taking some time to recover.
A buildup of cost pressures and ongoing uncertainty about the potential of further reforms means that some landlords are undoubtedly reviewing their investments.
Options landlords could be grappling with include restructuring their finance, forming limited companies, changing to holiday lets, holding back on further investments, or selling their properties.
And although earlier fears of a mass sell-up have not been realised, some of the recent statistics making the headlines do point, in the very least, to ongoing hesitance.
So, what can we do to help?
The best course of action for each landlord will of course depend upon their individual circumstances, but there is a role for industry to play. For lenders that means making sure the products on offer reflect the current needs of the market, and for brokers it means being armed with as much information as possible about the available products and criteria from different lenders.
Good lender/broker relationships are key to helping landlords secure the best deals for them, especially as product ranges change in response to those evolving market needs.
Supporting landlords with adverse credit
For example, we recently introduced a new non-standard credit BTL mortgage, directly in response to broker demand for more options for clients who have experienced minor credit issues.
This is a completely new area of lending for us but recognises that some landlords are struggling with financial pressures and need more mortgage options to help them overcome those short-term challenges.
Same pricing for limited companies
Smaller landlords might be considering forming a limited company in a bid to mitigate some of the tax implications of owning a rental property.
More companies have been set up to hold BTL properties since 2016 - when tax changes started being implemented - than in the preceding 50 years combined, according to figures from Hamptons Estate Agents. There are currently around 345,400 BTL companies in the UK, the figures state.
One of the considerations for anyone thinking about incorporating could be the fact that a limited company BTL mortgage typically attracts a higher rate.
However, we don’t price differently for limited companies. Our BTL mortgages apply equally to individual landlords, limited companies with a maximum of three properties, regulated and consumer BTL. This could help companies looking to remortgage as well as those considering a Special Purpose Vehicle.
Removing the barriers for landlords
Despite the challenges, opportunities do remain for BTL investors. Yields and rents are at record highs, rental properties are in demand and the holiday let market is thriving. Long term gains are still there for those who can weather the short-term storm. We just need to help them make it through.
It means removing barriers, around things like minor credit blips and limited company rates and being as flexible as possible.
We base our criteria on high, medium and low rent rather than ICR (interest cover ratio) and we’ve recently reduced rates on BTL, holiday let and expat holiday let mortgages. When it comes to holiday lets, we don’t ask to see active credit in the UK.
Our underwriters look at each case on its own merits and adopt a completely bespoke approach to applications, working closely with brokers to overcome unique circumstances.
It’s the advisers though who are key to making sure existing and potential investors are aware of their options and the broad range of mortgage products available from the whole spectrum of lenders.
