Landlord borrowers with specialist BTL needs are still underserved by lenders in this space, research from Finova has revealed.
In a report, ‘New Foundations: Building the Next Era of BTL Lending,’ 200 mortgage brokers and 100 lenders were surveyed to gauge sentiment and needs within the PRS.
Nearly half (44%) of lenders said that borrowers with complex needs are the most underserved in today’s market, ahead of first-time buyers (39%) and landlords in general (34%).
Brokers indicated several challenges in placing specialist cases, citing problems securing finance for low EPC properties (39%), complex documentation for corporate and limited company structures (37%) and limited product availability for complex or non-standard properties (34%).
This is despite the fact that specialist BTL products can often be advantageous for lenders, with 22% identifying holiday lets as having the highest margins.
This was closely followed by limited company BTL and HMO products at 20% each.
Additionally, specialist BTL products are not necessarily more risky for lenders.
Lenders are more likely to say default risk is lower on limited company BTL (48%), HMOs (56%) and portfolio landlords (43%) than on other types of lending.
Brokers agree, with under half (47%) also perceiving default risk across specialist BTL products to be low.
The report also sought insights on sentiment and where lenders expect growth to come from.
The majority (38%) see the strongest growth to come from HMO and MUFB needs, closely followed by limited company BTL (37%) and holiday lets (36%).
“Today’s specialist borrowers are more complex, and legacy systems weren’t built to support the nuanced affordability assessments or KYB/KYC checks they require,” said Hamza Behzad, business development director at Finova.
“Our research shows that while these products offer stronger margins and lower risk, many lenders are still relying on rigid processes that can’t keep up.
“To grow sustainably, lenders need to adapt; those that invest in better tools and work closely with brokers to serve these customers more effectively will be best placed to lead the next era of specialist lending.”
