Indeed, I’ve come to the opinion that, just because it’s asked for, doesn’t mean you should deliver it.
It reminds me of those days pre-credit crunch when many distributors would beat a path to your door and suggest or even demand that you gave them the products their advisers were crying out for. Needless to say, these tended to be at a price and a place towards the top of a risk curve we were not willing to accommodate.
I’ve never wanted the lenders I’ve worked at to be popularity-chasers and in today’s mortgage market I believe this ethos remains important. I was very heartened to read the interview with BM Solutions’ Phil Rickards on this very site, which covered off limited company buy to let and explained BM’s current lack of involvement the sector, despite it clearly being one of the biggest buy-to-let lenders in the country.
You might describe Fleet Mortgages as a competitor of Phil’s business, and to a certain extent you’d be right – although I do believe we fish in somewhat different waters – but to hear Phil talk about his priority being the Prudential Regulation Authority’s (PRA’s) underwriting changes for portfolio landlords rather than any move into limited company lending was enlightening.
The article suggests that certain parties are crying out for a so-called ‘big buy-to-let name’ to make a foray into limited company lending in order to boost its profile and to ensure there is enough capacity to cope with demand – and I don’t doubt that’s the case. The question is whether the bigger names will respond to such calls.
Perhaps we come back to the point above – just because there are relatively loud calls for a lender to enter a specific sector, doesn’t mean it’s an appropriate move for that business. Particularly if such a move would simply raise the profile of a part of the buy-to-let market which seems relatively well-served, is certainly well understood by the intermediary sector, with (one would hope) all those lenders involved adequately equipped to be working in this part of the market.
That could be an important point to recognise in terms of ‘bigger lenders’ offering limited company products – the larger buy-to-let lenders are not necessarily set up to accept this type of business, which isn’t to say they can’t, but strategically they choose not to compete. Their processes, which are undoubtedly suited to standard buy-to-let lending, may not translate easily to the limited company market: indeed, they may well see this different type of lending at odds with their current processes.
There could be an argument made that larger lenders might use the PRA portfolio underwriting changes – to be introduced in September – as a kind of stepping stone for limited company product launches. We shall see. We don’t know the exact amount of limited company buy-to-let lending taking place but you might surmise that individual lending still exceeds it by a considerable amount.
And therefore I suspect the ambitions of those lenders might actually lie elsewhere. Perhaps even in other sectors completely. As Phil rightly appears to say in the interview , this should not simply be a question of bowing to perceived pressure, turning on the same lending tap and expecting the same result. You have to do what’s right for your business, and to operate where you feel you can deliver most effectively.
It’s my belief that a specialist approach is required in areas such as limited company lending and it appears positive that mainstream players, and good guys like Phil, believe the same thing.