BTL2021: Tax adviser referrals gave brokers £5m+ portfolios to incorporate – Paragon
Speaking during the event, Paragon national sales manager Jason Wilde (pictured) revealed the lender had dealt with several multi-million pound cases from brokers originated through tax specialists.
“There has never been a better time for intermediaries to forge working relationships with accountants and tax specialists,” he said.
“We’ve had a number of £5m+ portfolios and incorporations which have been introduced to brokers by accountants and tax advisers.”
Wilde noted that with the eradication of mortgage interest relief for landlords this had caused another wave of landlords to consider their tax position and potentially incorporate their portfolios.
“With section 24 being fully implemented this year there will be a number of landlords facing yet another increase in their taxable incomes. This has driven a demand in limited company borrowing,” he added.
Aldermore national sales manager Matt McCullough agreed, noting that he thought the rate of incorporating will increase over the next 12 months, as the pre-tax changes peak of five-year fixed rate deals in 2016 would be starting to mature.
“So this will be a big time for it,” he said.
Four keys to limited company buy to let
And McCullough emphasised the importance of clients getting tax advice first, then going to the intermediary for mortgage advice before bringing them together. He concluded his presentation with the four key points for undertaking limited company BTL. They were:
- Get yourself set up and linked with a tax adviser. Why? To make this whole process easier. Clients get the right advice but actually it also links with the mortgage so it all works smoothly. And it’s also a good referral lead for you both.
- Get familiar with all the acronyms that are used in company buy to let, SPVs, the different fixed costs that are there, debentures, floating charges, personal guarantees, all of that stuff. Do a bit of reading up to ensure you know exactly what’s being talked about when a lender asks for certain things.
- It might sound quite obvious, but reach out to your current landlords that are on your book and understand where they are in this journey. Is it something that you need to prepare for if they are going to come to you in a few months’ time with a business plan like this to incorporate.
- Lastly, there’s so many great business development managers (BDMs) in the market that know this stuff inside out. Speak to them about any concerns that you’ve got and they will absolutely help educate you in this area of the market if you’re not quite upskilled there just yet.
Perfect conditions for developers and landlords with expanding PDRs and funding supply
Speaking on Specialist Lending Solutions Television in association with Roma Finance, Enterprise Finance managing director Harry Landy and Vantage Finance national sales manager Joe Aston, agreed there was likely to be a surge in business in this area.
Discussing the widening possibilities for using PDRs, Aston explained the ease of access would prove very attractive to experienced landlords and developers.
And this could bring new people into the market as well.
“We’re going to see a lot more volume of borrowers looking to do their first development or refurbishment scheme by using the new PDR fast track process,” Aston continued.
“We’re going to see an increase across the board on this.”
Landy emphasised there were many factors all working together at present making this an attractive market to get into.
“The cost of entry will be cheaper because developers are going to be buying a high street commercial entity which has maybe been vacant for a long time,” he said.
“So purchasing that should hopefully be at a lower point, they can add more value to it and it’s going to be a quicker and easier transition.”
Landy continued: “What we’re seeing as brokers is a wave of products geared towards these refurbishment projects and end values, so it’s almost proving to be a bit of a perfect storm for property developers and landlords.
“They can have access to more properties at a cheaper price, there’s a range of financial products available to specifically cater for these refurbishment projects and then when the work is complete there’s another range of products to help take that development finance out.”
Nick Jones, commercial director at Roma Finance, outlined the changes which have been made this month and agreed with Aston and Landy’s assessments.
“According to the latest figures from Land Registry there’s certainly a big lift in these types of applications and we’re certainly feeling a lot of those applications at Roma Finance,” he said.
This discussion was filmed before Nick Jones left Roma Finance this week.
BTL2021: Product transfers will become ‘very important’ in limited company BTL
Speaking at the Buy to Let Online Forum, representatives from Paragon and Aldermore noted that lenders would be increasing the range of product transfer for limited company borrowers.
Paragon national sales manager Jason Wilde highlighted that with rising costs in the market a cheaper refinancing option would be welcomed by landlords.
Responding to an audience question Wilde said: “Product transfers will be very important, certainly, with the drive in limited company lending we’ve seen.
“Refinancing buy-to-let properties can be very expensive at best of times, however when you factor in legals, the costs can spiral out of control.
“Certainly, product transfers and further advances can become very important in this marketplace. With product switches most lenders are realising the importance of this and we do at Paragon,” he added.
This was echoed by Matt McCullough (pictured), national sales manager at Aldermore, when quizzed about the difference in rates between limited company and standard buy-to-let products at some lenders.
He said: “Product transfers are a coming thing – people are going to start doing limited company product transfers.
“You’ll find in the main a lot of lenders do tend to price the same there.”
And product transfers have been incredibly important to the wider buy-to-let market over the last year, as Phil Rickards, head of BM Solutions noted.
“We all know product transfers have been the lifeblood of our industry through tough times, and particularly at the start of the pandemic lots of product transfer business was being written,” he said.
“We had our biggest ever year on product transfers last year, so that’s a strong part of the market.”
No change to Help to Buy caps despite local hotspots – housing minister
However, he said government remained satisfied with how the caps were working and there were no plans to revise them.
The Help to Buy 2021-23 scheme began accepting applications in December and started allowing completions in April.
It is restricted to only first-time buyers and has regional property price caps which set the maximum purchase price in each region.
The regional caps are aligned to the first-time buyer market and are all set at 1.5 times the forecast regional average first-time buyer price as predicted by the Office of Budget Responsibility, up to a maximum of £600,000 in London.
In a written question, Labour MP for Stockport Navendu Mishra asked whether the Ministry of Housing, Communities and Local Government (MHCLG) had assessed the effectiveness of the caps.
Housing minister Christopher Pincher (pictured) replied: “The caps were designed to support the purchase of properties that are more consistent with the wider first-time buyer market.
“This in turn helps optimise the resources available to enable purchasers to achieve the dream of home ownership. The government has reviewed the caps and continues to be satisfied they allow good availability of first-time buyer type properties in each region.”
Pincher admitted there will be “local hotspots within each region that are more expensive,” but argued the benefits outweighed the restrictions.
“However, the approach is aimed at striking the right balance between better targeting the scheme so it can assist more first-time buyers, while accounting for a degree of price variation within regions without the additional complexity that may arise from more localised caps.
“Therefore, there are no plans to revise the caps,” he added.
In February the previous version of the Help to Buy scheme, which closed to new applications in December, was extended until 31 May to allow completion of builds and purchases affected by the pandemic.
Metro Bank launches 95 per cent LTV mortgages
It has introduced a five-year fix deal available for purchases only at an interest rate of 3.89 per cent and a maximum loan size of £570,000.
The lender said it had also added a top-up option for existing homeowners and rate switch options for existing customers.
This week has seen a surge in 95 per cent mortgages added to the market as the government’s guarantee scheme launched, with Halifax, NatWest, Santander, HSBC and Barclays going live with their offers.
Metro Bank is not using the government’s scheme.
In February it re-launched its 90 per cent LTV mortgage range while last month it introduced mortgages for borrowers with credit problems which are available up to 80 per cent LTV.
Charles Morley, director of mortgage distribution at Metro Bank, said: “As one of the only lenders to consistently remain in the higher LTV market throughout the coronavirus pandemic, we’ve been working hard to launch into 95 per cent LTV residential mortgages.
“Our customers will benefit from a competitive five-year fixed rate. We’ve also been making a number of new hires across our mortgages business recently, offering specialist lending expertise as we look to appeal to a wider range of mortgage customers.”
Pressure mounts for renters, self-employed, lone parents and furloughed workers
More than twice as many people on furlough than not on furlough (17 per cent versus 8 per cent) were likely to have found it difficult to keep up with their mortgage payments. Almost a third (29 per cent) of those on furlough had used savings to pay their mortgage or rent, compared to 17 per cent not on furlough.
Around 12 per cent of people were behind with at least one household bill, with this figure to rising to 24 per cent for private renters. Tenants were most likely to be behind with utilities (14per cent), credit card payments (9 per cent) and other household bills (9 per cent).
The figures come from the English Housing Survey’s Household Resilience Study, Wave 2 with surveys taking place in November and December 2020.
In November/December 2020, 9 per cent of private renters were in arrears, up from 3 per cent in the same months in 2019-20 before the pandemic began.
Some 3 per cent of couples without children and 5 per cent of households of unrelated adults were behind with one or more household bill compared to 37 per cent of lone parents with children aged 15 or under.
Overall, 61 per cent of households reported that their income had not changed since the previous Household Resilience Survey in June/July 2020. One in 10 (11 per cent) reported it had increased by at least £100 per month. About a fifth (17 per cent) reported it had decreased by at least £100 per month.
Similar to June/July 2020, the self-employed were more likely than those employed full or part-time to report that their income had decreased by at least £100 (40 per cent of those self-employed reported this, compared to 18 per cent of those employed full-time and 23 per cent employed part-time).
More households reported having savings compared to before the pandemic, but a quarter (25 per cent) of households said that their savings balance had fallen during the crisis. More than four in 10 (43 per cent) of those who are furloughed have no savings.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The pandemic has dragged hundreds of thousands of people the wrong wide of the resilience gap, and renters, self-employed people, lone parents and furloughed workers have been hit particularly hard.
“Overall, more households have savings than before the pandemic, and 13 per cent of people have been in a position to actually put more aside, but those in full time employment and people who own a house with a mortgage are much more likely to fall into this bracket.
“Meanwhile, a quarter have seen their savings fall, and vulnerable groups are more likely to have suffered. People on lower furlough incomes and the self-employed who lost work have been less able to save. Meanwhile, those who rent are more likely to have eaten into their savings to pay rent.
“They’ve struggled with their bills too. Renters have found it far harder to pay their bills: one in 10 are behind on rent, and almost one in four are behind on at least one bill. Lone parents are most likely to have fallen behind with bill payments.
“There are no simple answers when you’re facing this kind of pressure. A year on from the start of the crisis, there are no easy costs left to cut. There are also signs that people have already made bigger changes to their lives to keep a lid on costs. Around a fifth of privately rented households have increased by at least one person, which is a sign people are moving in with others to cut costs.”
BTL2021: Mini-boom and ‘really strong pipelines’ give BTL market positive edge – Rickards
Speaking at the Buy to Let Online Forum, Rickards (pictured) emphasised that the market had proved remarkably resilient over the last year and was on course to remain so.
Rickards added that 2020 was BM Solutions’ biggest year for new business since 2007 and its largest ever year for product transfers.
He also praised chancellor Rishi Sunak for not targeting the sector for tax rises and for including landlords in the payment deferral scheme.
“Has there been a mini-boom? Yes, there has, aided somewhat by the stamp duty holiday,” he said.
“It’s great to see the chancellor, for one of the first times I can remember, giving buy-to-let a step up.”
He continued: “I’m sure we all would have signed-up for last year’s market of £37bn just down from £42bn the year before.
“Nobody really knows what’s coming, but my prediction would certainly be for a market in the high £30bns maybe even early £40bns as buy-to-let completions and pipelines still look really strong – a good start to 2021 already.”
When asked about whether BM Solutions would be following-up the growing interest in environmentally friendly mortgage options, Rickards said: “The green agenda is high on everyone’s agenda so this is something that I wouldn’t rule out in the future.
“We are currently focussing on finalising the roll out of our new system with PTs next to market soon.”
Rickards concluded his session with a positive note on the market.
“There’s never been a better time to be a mortgage adviser, landlords need your voice more than ever,” he said.
“I’m cautiously optimistic about the future of the buy-to-let market. It’s been through lots of challenges and landlords themselves have shown how resilient they can be.”
Nick Jones leaving Roma Finance
Jones (pictured) joined Roma in August and was charged with heading up the specialist lender’s new business and marketing strategy, which it said resulted in a 60 per cent year-on-year rise in new business.
It said Jones was brought in to share his experience, knowledge and concentrate on creating a sustainable front-end operation.
This included opening distribution, delivering the rebrand and giving the business a platform it can leverage over the next three years.
Scott Marshall, managing director of Roma Finance, thanked Jones for his efforts and said he had brought great success in a short-period.
“Upon joining us Nick had three objectives, to rebrand us to a modern and dynamic business, enhance distribution and ensure we were structured to achieve our ambitious plans,” he said.
“Nick achieved all of this inside of 12 months and while we are sad to see him leave, the legacy he has left us with will enable us to continue to strive forward and continue to scale.”
Jones joined Roma after spending a combined 19 years at Together over two spells, with one year at Compass Finance which ended in 2005 sandwiched in between.
He added: “I just want to say thank you to Roma Finance for a superb opportunity where I got to lead the recent rebrand, re-position Roma as a leading short and medium-term lender, while designing and embedding a structure that enables their ambitious growth.
“I wish the team all the absolute best for the future, it’s going to be exciting and I look forward to watching the journey develop.”
Mortgage broker fees rise four per cent as FCA increases budget by £26m
According to the regulated fees and levies CP21/8 paper published today, brokers earning more than £100,000 in annual income will see their FCA fee rise to £11.031 per thousand pounds of income.
Overall, the FCA expects to raise £18.4m for its annual funding requirement from those in the A.18 home finance providers, advisers and arrangers block – a 1.3 per cent increase on last year.
Broker fees for the money advice levy will also increase from 13.9p per thousand pounds of income to 17.6p. The same level will apply for the debt advice levy.
There is some better news with the FCA confirming its minimum flat fee for firms in all A-blocks will be maintained at £1,151 for the year.
But an increase in application fees for newly-regulated firms and in consumer credit fees will apply.
In all, the FCA is proposing a £26.6m increase to its annual funding taking it to £616.5m – up 4.5 per cent from the 2020/21 financial year.
TheFCA confirmed the Financial Ombudsman Service (FOS) is increasing its general levy by £12m to £96m for the year, which is also collected by the FCA, and the FOS has increased its case fee by £100 to £750.
“Keeping minimum fees unchanged for 2021/22 will continue to help protect the smallest firms from the impact of Covid-19. The exception to this policy is consumer credit minimum fees,” the FCA said.
And it noted that mortgage advisers will also be impacted by the revised consumer credit minimum fees, so it was considering merging this with the A fee block so only one minimum fee is paid.
Speed up applications
The application process for newly regulated firms or those joining networks has also been a point of criticism, with JLM Mortgage Services previously highlighting that it has taken six months to process and register new AR firms.
The proposed increase to the application fee for these firms was generally welcomed in recognition that applicants should make a larger contribution towards costs to reduce pressure on existing fee-payers.
However, the issue of performance was raised as several respondents to the FCA consultation “made criticisms of the quality and timeliness of our services”, the regulator said.
“They hoped to see corresponding increases in our efficiency in determining applications and an impact on periodic fees in the future.”
Finalising the increase, the regulator said: “The time is never perfect to increase fees.
“As we said in CP20/22 and some respondents confirmed, we believe FCA application fees are not in themselves significant barriers to entry compared with the wider costs of setting up a new business, including the costs of compliance.
“The fees are intended to recover costs that we have incurred. The revalorised charges would still recover only up to two-thirds of our costs, while the great majority of applicants will pay £10,000 or less, with the lowest fee at £250.
“The potential additional revenue of around £6m would mitigate periodic fees to some extent, but not until 2022/23 and the impact is likely to be small.”
FCA admits culprits should pay more in FSCS levy
The regulator made the statement in its regulated fees and levies CP21/8 paper published today.
The FCA has come under significant criticism from across the mortgage market as brokers are facing massive bills to cover FSCS compensation costs for failures in the investment and pension sectors.
Mortgage brokers will pay a collective £22.9m towards the more than £1bn FSCS levy in 2021-22, more than seven times the £3m total they contributed during the last financial year.
Fairer system to incentivise good outcomes
Critics claim it is unfair that other sectors, such as mortgage advisers, have to pick up the pieces from those that have been causing liabilities, and that the regulator should have been better in its oversight duties.
“We have acknowledged that the current cost of the FSCS levy for certain firms is too high, especially at a challenging time for all businesses,” the FCA said.
“We are proactively taking action to tackle increasing regulatory costs through a stronger focus on firms and individuals who do not meet the required standards.
“This includes a firmer approach to firms applying for authorisation and making better use of data and intelligence to identify harm caused by authorised firms.
“In the specific area of consumer investments we are aiming to reduce the harm which consumers can suffer with a view to, in turn, reducing the redress liabilities which can give rise to FSCS claims in the longer term.”
And it added that the funding system was not suitable.
“We also want to work towards a system where firms which cause redress liabilities end up paying more of the bill before recourse is needed to the FSCS,” the FCA continued.
“This would be fairer and would further incentivise firms to achieve good outcomes for consumers. It would benefit firms of all sizes.”