Taking the most recent changes to portfolio lending which arrived on 1 October, Shawbrook has not been forced to make the same degree of strategic shift announced by other institutions operating within this space.
Outside of some policy and process adjustments it continues to be business as usual with our appetite to lend to the professional investor and landlord community remaining extremely healthy.
There is speculation as to the ongoing impact. Our thoughts are that the increase in resource necessary to cope with the somewhat onerous underwriting requirements will have an impact on pricing, and that the time to assess an application will increase compared to the automated online processes most mortgage brokers and customers would be familiar with.
In addition, where the portfolio is geared in excess of 75%, some lenders are likely to have some sensitivity around refinance risk. This may result in less funding being made available in order to reduce exposure across the overall portfolio.
Lenders may also ask investors to deleverage the higher loan-to-value properties, or in some cases, may choose not to lend at all based on the view that the portfolio is not sensibly geared and that they would potentially be lending to a vulnerable investor.
Client tax positions
The impact may also be felt across those properties that are due to be refinanced within the next 12 months, as lenders will likely check if this is possible. Plus, if the income or loan-to-value is tight, there may well be a requirement to deleverage.
There will also be the assumption that portfolio landlords are higher-rate tax payers and therefore any cases that move forward within a lower tax band are likely to require confirmation of investors’ tax positions.
The customer will need to provide evidence to demonstrate that they have sufficient income to support their personal living expenses, and may even need to provide proof of all rental payments made over the last 12 months.
It is also important to note that we may see more institutions pulling out of the portfolio landlord market altogether and focusing purely on the “simpler” customers with up to three mortgaged properties.
This just highlights the need for brokers to build strong relationships with specialists of all kinds, ensuring they are best placed to support their customers throughout this period of uncertainty.
While I remain hopeful for the aforementioned “period of calm” as we all seek to adjust to the newer world, with all things in this fast-paced environment the next shift could be just around the corner, so it might pay not to rest on our laurels for too long.