The buy-to-let market is forecast to be significantly smaller this year than last, following a succession of tax and regulatory changes affecting the sector.
Mortgage Solutions last week surveyed brokers on how they expect lenders to attempt to regain the market share lost by the changing shape of the buy-to-let market.
And almost half of respondents said they felt lenders would look to work harder at niche areas and cut rates, while 21% went for raising service levels in order to retain business, and 13% predicted increased proc fees.
James Mole, head of finance and mortgages at Nova Financial, said that there are already lenders “slotting into the specialist areas of the market which the big lenders are too inflexible to cater for”.
He added: “I think for the large lenders to regain lost ground they need to become more flexible. They should also remove some of their archaic criteria that is simply outdated in today’s market.”
Mark Harris, chief executive of SPF Private Client, said that the changing market offered the chance for lenders to evolve and “reinvent themselves in different areas”.
He added: “While slashing mortgage rates seems an obvious way of drumming up more business, it is not something all lenders are able to do – it very much depends on how they are funded. If they are not able to do this, then lenders may have to look at alternatives such as tweaking criteria.”
Chris Lloyd, associate director at Enness Private Clients, said that some lenders were already looking at niche areas of the buy-to-let market which previously had been poorly served. He said: “We are seeing a lot of clients going into limited company buy-to-let as the tax situation is a bit different. A year ago there were only a couple of lenders doing it, now there are a load of them.”
What about proc fees?
Mole said that while proc fees shouldn’t play a deciding factor in advice, some lenders would need to at least bring themselves in line with their rivals if they want to win business. He continued: “There is one lender I can think of that has low proc fees and has lost considerable market share. I can only assume they purposely want to reduce their buy-to-let exposure.”
Andrew Montlake, director of Coreco, said that lenders are starting to realise they need to offer something when it comes to retention proc fees. He said: “They are a recognition of how much work advisers do with clients when their product expires, and that’s right and fair. But an increase on proc fees at the front end shouldn’t necessarily mean an increase in business.
“As brokers, all we want is a fair, stable proc fee environment,” he concluded.