Liz Syms is CEO of broker, packager and network Connect for Intermediaries and as a result of this three-pronged business approach has seen how these changes have impacted the market from all broker angles.
But the underlying trend is the increase in complexity and the need to be a real specialist.
“When I started out I was a full IFA – doing pensions and investments and mortgages,” she says.
“But as more of my business became mortgages I didn’t think it was possible to be specialist in all those areas – pensions, mortgages and investments.
“I’m seeing that happening again, but now to the mortgage sector itself and I don’t think most people can be really good in every single mortgage sector,” she adds.
Waking up to commercial BTL
Unsurprisingly the biggest changes have hit the complex buy-to-let market and Syms explains that brokers are now expected to do far more work for their clients to proceed cases.
The well-publicised portfolio lending changes from the Prudential Regulation Authority (PRA) and government tax overhaul have taken headlines, but there is also increasing complexity in houses of multiple occupation (HMO), ex-pat and offshore areas.
“Property investors are also waking up to the commercial market because there are attractions to that space because it sits outside some of the portfolio changes – particularly semi-commercial,” she continues.
“So more investors are waking up to that, brokers are wondering how to cope and so our commercial arm has got busier over the last year.
Projects involving shops above flats, permitted development and refurbishment have been the main sources of cases in this regard.
There has been some concern about how lenders are handling the changes in the complex buy-to-let market. Syms says she has seen some interesting criteria interpretations as lenders settle down.
“Some lenders are definitely being more flexible,” she says.
Lenders are trying things out, says Syms, and those whose lending has slowed a little are asking if they have got it quite right to this point.
Substantial workload increase
But the net result of the changes has been a substantial increase in workload for brokers in the space – and Syms says they should be prepared to take this on, particularly for the biggest of clients.
“If they’ve known them for many years and done all their mortgages for them they should be able to put a business plan together and ask ‘does this look good to you?’” she explains.
“With the majority of the workload put on the brokers, any lenders that are doing things to make it easier will get ahead of the game.”
One such area is background portfolio assessments and calculation – somewhere Syms wishes lenders would be more flexible.
This is particularly so for landlords who have done it on a pre-PRA deal but the background check does not work now, even though the clients has significantly more rental income than their mortgage payments.
“There’s a few lenders who say ‘our background calculation is to see you’ve got more rental income than mortgage payments’ and they are winning,” she adds.
And although lenders are trying to be clear, in some cases it is not always easy and Syms raises concerns that some lenders’ staff may not be used to the complexity and level of underwriting involved.
“We get some strange questions coming out of underwriting, and we feel that some lenders, more than others are working really hard,” she says.
So with a tsunami of buy-to-let mortgages maturing in the first half of the year, does she fear the prospect of a raft of clients and landlords in general, barred from remortgaging under the new rules?
No, is the short answer, but again it could result in more work for brokers.
“If the borrower goes back to a traditional lender first and is unsuccessful then they will need to know there are other options in the marketplace,” she explains.
“Using a five-year mortgage is one, there’s also income based top-slicing, or they could consider a second charge.
“It shouldn’t be a problem, but it might be a bit more complex and might now need to seek some more advice,” she adds.
Moves towards limited company
With the introduction of all these changes the expectation has been that landlords will swing into the limited company space.
“Because of the tax changes in particular we are seeing a large number of clients reaching decisions with accountants about putting their portfolios into a corporate structure,” she continues.
“So if you’ve got one client with 40 properties that’s a lot of business from one client – and it will be very interesting to see how it plays out, because we are in that serious investor market.
“I don’t see all of that work actually happening for another year or two as the tax changes start to hit – they will time it to when it is most cost efficient to do it, and that hasn’t been yet.”