Speaking exclusively to Specialist Lending Solutions, Wootton admitted the lender found the market had changed quite significantly since its departure around five years ago.
“It’s challenging launching a new product which needs bespoke underwriting when you don’t know what the take-up is going to look like, but it’s been at the upper end of our expectations,” said Wootton.
“We’ve had quite strong demand which is very pleasing.
“Traditionally we’ve always had a limited company offering so we’re used to dealing with these cases and the extra checks involved.
“But we needed to understand what it would take to introduce new lending in this space and we improved that within the pilot.”
Changes made in the pilot phase included removing the floating charge, increasing the maximum loan to value of its products to 80% and increasing its procuration fee to reflect the additional work needed.
“We learned through the pilot and rollout so we were able to produce something we are pleased with,” Wootton added.
Mainstream limited company
With the overhaul of regulation and tax changes over the last two years the buy to let space has generally been perceived to be becoming more complex and technical.
This has seen a focus from more specialist lenders, but Wootton believes the limited company sector is also softening at the other end.
“It feels like limited company is going more mainstream,” Wootton continued.
“Before the changes it was a quite technical and specialised solution and that still remains – however, there’s also a simpler end of the market and that’s really where we are more interested.
“We’re trying to support a more ‘standard’ landlord who knows their business model but has taken tax advice and is only using a special purchase vehicle (SPV).
“There’s a sweet spot we are interested in, but we see it as a growing and sustainable part of buy to let,” he added.
This market, he expects to be driven by landlords being hit by the progressive tax changes.
Although some landlords will have been seeing higher tax bills landing since January, Wootton suggested this is likely to be a minority and it may not be until later this year or early 2019 that the majority begin to feel the effects.
“The tax relief changes are yet to have a really demonstrable effect but there surely will be some impact,” Wootton said.
“We are seeing some changes in behaviour, for example using spouses with a lower tax rate, but the majority of landlords will not have paid any increases in tax yet.”
Rogue landlords’ database
One of the key things the government has attempted to do is make the landlord market a more professional one and this is something TMW and its parent company Nationwide Building Society is supporting.
Its private rental sector partnership board brings together the National Landlords Association (NLA), the Association of Residential Letting Agents (ARLA), Shelter, Countrywide and The Nationwide Foundation and has been discussing and lobbying on a range of issues across the sector.
One of the early successes may be imminent.
The board has been pushing for limited access to the government’s database of rogue landlords.
“We support the rogue landlords database and would like access for lenders, brokers and letting agents to identify them,” Wootton said.
“We don’t want to do business with rogue landlords and we’re beginning to get traction with government on this.”
This also chimes with the government’s overarching look at regulation within the property sector.
Wootton is supportive of the government’s consultation that would bring the collection of ombudsmen together under one roof and would like this to go further with a housing court.
He believes this could help tackle the biggest issues in the rental sector.
“Most landlords want good tenants to look after their property, but the big challenge is when the relationship breaks down when there’s a problem,” Wootton continues.
“We don’t a have housing court, but Scotland does. If we had a functioning housing court I think we would tend to see most parties open to longer-term or indefinite tenancies because they would know their rights and have more security.”
The lender, through the Nationwide Venture Fund has also begun investing in the technology revolution.
The second of these investments has been made in Hazy – a software firm that anonymises datasets shared between businesses, helping to ensure GDPR compliance.
This follows its investment in Acasa which allows customers to organise and co-ordinate their bills and utility payments.
However, Wootton was more guarded on TMW’s plans for technology developments in the broker space.
Overall, Wootton is positive about the future for the limited company sector, but with industry data showing a slowdown in lending he admits it is increasingly important for lenders to get their pricing, criteria and service levels right.