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‘No accountant has enough PI cover to sign-off BTL tax advice’ – Foundation Home Loans London Supper Club

  • 20/12/2018
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Our London Supper Club in association with Foundation Home Loans was the last of 2018 and rounded-off a busy year for the industry.


Much of the pre-dinner chatter was about the success of the Mortgage SleepOut and the Mortgage Industry Collective Christmas single, Take Me Home.

Combined the pair have raised well in excess of £100,000 for the End Youth Homelessness charity.

When it got down to business though, it became clear that the hectic year has been greeted differently across the industry.

One broker suggested it had been more trying than would have been hoped: “It has felt like lenders are harder to deal with, valuers are harder to deal with, clients are more demanding, and solicitors were a nightmare.”

But there were also positives and a greater focus on building strong client relationships.

“We had a brilliant year,” explained another broker.

“This year has taught us it’s all about client retention. We need to keep clients happy more than ever before, while lenders are also trying to get to them.

“You must speak to your customer every two months – you’ve got to be touching them, for whatever reason,” they added.


We’ve used 60 lenders

One thing that became abundantly clear throughout the discussion was how the rise of specialist lenders had impacted the market.

Attendees noted how smaller lenders have taken share from the big high street names and also accommodated new segments of borrowers.

One broker highlighted that despite generally focusing on mainstream “vanilla” residential customers they had used around 60 different lenders this year.

“It’s amazing isn’t it. There was a time when the main three or four would get two-thirds of mortgage business – but we’ve been surprised how many different lenders we’ve used,” the broker said.

Another continued: “The fact you’re using so many different lenders sort of implies that actually it’s not about rate any more, it’s about who will actually do the deal.

“The trouble is all the specialists are now so close with rate and criteria, that for someone to be really successful, they’ll have to push the boat out with the criteria,” they added.

This was supported by a fellow broker who added: “There’s three things really: rate, criteria, and then the service.

“If one of those doesn’t work, then you’re not going to get the business – and those three have always got to be together.”

Another participant suggested this would be one of the most interesting segments of the mortgage market next year.

“These lenders have done really well establishing themselves, but it’s going to be really tough, a really competitive market, especially in that prime, specialist buy-to-let type space,” they said.

But keeping up with this widespread market could also prove a significant challenge for brokers as time is often such a premium.


Gearing-up, splashing cash

Following in its footsteps, though for different reasons, the buy-to-let market has also become far more specialist.

Well-recognised tax and regulation changes have been driving the market here, pushing it towards more professional and large portfolio landlords.

One broker noted that they had seen savvy large portfolio landlords remortgaging, gearing-up their lending, but holding on to the released money.

“They are sitting on massive amounts of cash and not buying unless it’s something perfect,” the broker said.

“But funnily enough, it seems to be even harder to remortgage in this situation, to say the landlord doesn’t want to spend it – a lot of lenders can’t get their heads around that.”

This then leads to two separate paths.

Those lower risk landlords who are happy to keep the cash liquidity to be able to repay a lender or for other scenarios, while others use it to buy quickly where “good deals can be done”.

“So they see some opportunities, go for it and buy in cash so they can get in quickly. They get good prices, do the work on it, and then keep going,” the broker continued.


Unwilling to sign-off tax advice

Of course, the taxation upheaval has led many landlords to assess potentially more tax-favourable routes such as limited company ownership structures.

This had been witnessed by the Supper Club attendees too – however a new issue is raising its head here.

Sensible brokers in this market will always recommend their clients get professional tax advice in this situation – but accountants are now increasingly unwilling to sign-off the advice they have given.

Without taking the responsibility for giving this advice, it can leave the client and landlord in a tricky, or potentially worse, situation.

“We’ve got a lot of clients who get tax advice to put the portfolio into limited liability partnerships (LLPs) and eventually move it across to limited companies. But at the moment, it’s a bit up-in-the-air on what HMRC’s view is on this,” said one attendee.

Another continued: “You’ve got prove you’ve switched it into an LLP for non-tax reasons and you can’t do that.”


Not enough PI cover

This prompted another broker to highlight that getting through this stage was causing significant problems for their clients.

“I’ve talked to a lot of the tax specialists about this because a lot of my clients have got big chunky portfolios.

“But there’s no accountant that I’ve come across so far that’s got enough professional indemnity (PI) cover to actually put their signature on a page to say yes, this is fine.”

A fourth broker added: “This is the thing – you get loads of accountants out there who are doing bespoke products, but they won’t sign it off.

“We can do the mortgage side, potentially, and that’s a challenge in itself, but you’ve got all these accountants going out there saying ‘This is what you should do’ and then they leave clients out to dry.”

Understandably, this lack of accountability has led to many brokers being hesitant to form referral agreements with accountants.

But there was one impassioned plea to lenders operating in the buy-to-let market.

“There’s a big gap in my mind that there’s top slicing for landlord income, but there’s no top slicing of rental income. That for me would be massive, but a lot of lenders just ignore it,” the broker noted.


We vetoed it

Finally, the discussion moved on to the evolution of mortgage technology and its role on businesses.

It’s become evident over the last year that lofty goals to automate the whole mortgage advice process have been replaced with more measured aims – keeping the adviser at the heart but simplifying administration and repetitive work.

But brokers are still keen to maintain a strong level of interaction with their clients.

One participant noted they had changed the whole back-end system to include the ability for clients to upload documents.

“We also tried initially letting them put their own fact find in and we would verify it afterwards, go through it with them,” the broker said.

“But as brokers we vetoed it; we’d rather do it ourselves with them because there’s so much stuff that they miss out.”

Another concluded: “If you lose that personal touch, even through the administration process or with the customer service team, then you lose your personality.”




Paul Clark, City Mortgage Solutions

Gary Cox, City Mortgage Solutions

Howard Levy, SPF Private Clients

Andrew Montlake, Coreco,

Guy Nyirenda, Coreco

Gurmail Singh, Charles Cameron & Associates


Foundation Home Loans:

Jeff Knight

Sarah McCawley


Mortgage Solutions:

Danielle Dennis

Oonagh Sheehan

Owain Thomas


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