Brokers must decide if buy-to-let’s shift to SME finance is for them – The LendInvest interview

The lender also believes it is time for brokers to decide if they want to specialise in the new market or to back away and partner up with someone who is active in it.

LendInvest sales director Ian Boden told Mortgage Solutions that the pattern for the post-portfolio lending changed market was beginning to come clear.

“Most purchases are through a limited company rather than under personal ownership,” Boden said.

“However, we’re not seeing a lot of flipping properties from personal ownership into limited company yet because of the costs involved.”

As a result of this, Boden believes the market may remain somewhat fractured as portfolio landlords maintain properties under personal and limited company ownership.

“I think that’s why more of the market will move into the specialist space because it become more complex. Lenders will have to have a commercial mindset to it,” he added.

Further demands on brokers

If that development continues as Boden expects, it will place further demands on brokers to understand their clients’ needs and how they wish to operate.

This could be particularly tricky for those who do not have the experience or desire to work in a more SME-focused market finance world with its complexities.

“A lot of growth in the BTL market was driven by the dinner party landlords investing for their pension planning and that’s what brokers have focused on,” Boden continued.

“If the sector is going to shift, then brokers need to understand that. We are seeing the growth of the specialist broker networks who are able to help them. So brokers have the choice to learn it themselves or partner with someone.”

Product innovation needed

To support this changing market Boden hopes to see a surge of product innovation and hints that LendInvest will seek to take its offering in that direction once it has settled in to the market.

“Some portfolio landlords are in fact a part time SME with the income they generate from their properties. And as they grow their portfolios they eventually become full-time business owners,” he said.

“At the moment if someone has 40 properties they will likely have 40 mortgages, rather than an overall finance for those 40 loans. It becomes a more commercial proposition then.

“So we need to see more innovation into the space taking into consideration the portfolio itself.”

Understanding the portfolio

This could take many approaches, but landlords may own different properties for different reasons – potentially for capital growth rather than rental yield.

As portfolio landlords become more common and the size of portfolios begins to grow, this differentiation to provide a balance may become a greater consideration for lenders and next, brokers.

Perhaps unsurprisingly Boden believes the increasing complexity will see more high street lenders ease their way out of the market, with specialist lenders and challenger banks taking on a bigger role.

LendInvest clearly aims to be one of those and has plans to further grow its business development force around the country early in the New Year as part of that strategy.

End-to-end landlord finance

The lender already had a foot in the bridging and development finance markets prior to its recent buy-to-let launch.

Boden also expects there will be a growing end-to-end process for landlords as they become more complex and need to handle different elements of their business – for example branching out into houses of multiple occupancy, or taking on expensive building work.

All those elements need to be handled better by the industry as landlords move between the various stages, he concludes.