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TMW direct-to-consumer BTL pilot ‘fraught with problems’, brokers say

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  • 30/11/2016
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Industry heavyweights have raised concerns over the plausibility of The Mortgage Works’ move to pilot a direct-to-consumer buy-to-let proposition, questioning whether customers will receive appropriate advice, particularly in the current climate.

Brokers said that the timing of TMW’s pilot “raised a few eyebrows” with upcoming changes to underwriting standards set to take hold of the sector, alongside tax restrictions and higher Stamp Duty costs imposed on landlords.

David Whittaker, CEO of Mortgages for Business, said it was a “significant” move for intermediary-only TMW to target direct customers.

“TMW exists for a sole purpose and that is to support the intermediary market,” he explained.

Whittaker also cited a growing demand for limited company buy-to-let mortgages, which are not available through TMW. Findings conducted by Mortgages for Business show that more than 70% of purchases through the firm are being taken out in a limited company.

The appetite for limited company products also meant customers need to be challenged on whether they have received appropriate tax advice, Whittaker said.

Ying Tan, managing director, Buy to Let Club, agreed: “Without a doubt, customers need choice, they need to understand the difference between owning via a limited company structure and a personal structure and they need lots of different choices between a specialist lender, high street and vanilla lender.

“Given the various tax and PRA changes the need for specialist advice is more important than ever.”

Recent moves by large lenders to retain clients using direct marketing tactics have caused consternation among brokers, with some saying they planned to boycott firms that pursued such a strategy.

John Charcol’s product technical manager Simon Collins, said if TMW’s direct offering competes with what is on offer to intermediary partners, brokers were likely to find reasons not to direct their client through the lender.

He added: “The timing does raise a few eyebrows because now more than ever you’ve got to make sure that a potential client has been given tax advice before they commit to a particular buy-to-let deal. With the current regime you can’t just show someone a range of buy-to-let products and let them pick before they’ve had proper tax advice and are aware their gross rental income is going to push them into a higher rate tax bracket, for example.

“If anything I might have expected lenders to go the other way and focus their efforts more on the intermediary market.”

Nationwide declined to comment further.

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