From Saturday 30 September lenders will be required to carry out specialist affordability checks on landlords who own four or more mortgaged buy-to-let properties, classed as portfolio landlords.
Recent weeks and months have seen a host of lenders announce changes to their criteria when it comes to this subset of borrowers. For example, just last week Foundation clarified its own approach to the new rules, following on from the likes of BM Solutions, One Savings Bank and NatWest.
However, a new poll of brokers by Mortgage Solutions has revealed around 54% of brokers do not feel completely comfortable about the changes, compared with barely a third (32%) saying they are ready, with a clear strategy in place for new cases.
Aaron Strutt, director at Trinity Financial, said it was understandable that so many brokers were not totally happy with the new rules, noting that each lender seems to have a different interpretation of the criteria, meaning intermediaries have a lot to take in.
“Brokers are well and truly used to criteria changes and they will adapt over the coming months. For the moment it’s the landlords themselves who seem to be panicking about all of the amendments and how they will be affected,” he continued.
“It is hard to believe we would have needed all of these changes seeing as lenders are reporting such huge drops in buy-to-let purchase activity, mainly because of the unraveling tax changes. For the moment the buy-to-let remortgage and product transfer market is particularly busy.”
Brokers must adapt
Rachel Lummis, mortgage adviser at Xpress Mortgages, noted that lenders have been very clear in communicating changes, holding training events and offering to visit in order to go through how the new criteria will work.
“Brokers already obtain information on portfolios, assets and liabilities as part of the fact finding process, so we just need to get into the habit of collecting the business plan and cash flow forecast. Both items sound worse than they are; in reality is fairly simple stuff, and there are so many examples available from lenders’ websites that you can adapt to use for your clients
She concluded: “No one likes change, but we have to embrace it when it comes and adapt. This will all be the norm in the New Year: give it a few months and this will be comfortable to most brokers. My only wish is that it only applied to landlords with 10 or more properties, as so many landlords will fall under these new rules.”
A good time for specialists
Adam Hosker, director of Bespoke Finance, noted that lenders are interpreting the rules in different ways, adding: “While all lenders are asking for spreadsheets, very few are asking for cash flow forecasts. Some have no business plan requirement, some have tick box business plans and others have full on business plans. Some lenders have higher stress tests for portfolio landlords, and others don’t. Some have special software to upload portfolios, some have bespoke spreadsheets, others have employed teams to type up for you.”
Hosker suggested that this range of approaches meant that the days of the residential mortgage broker that also does buy-to-let is limited, with specialist brokers set to benefit.
Complexity adds to appeal of brokers
Andrew Montlake, director at Coreco, said that the way lenders have “drip fed” their changes out to the market has not helped, but added that the complexity around the different approaches adopted by different lenders actually makes brokers even more valuable.
He explained: “This means that brokers not charging fees for this extra work are seriously undervaluing their contribution and the industry as a whole, something I expect to change in this area, where perhaps annual fees rather than transactional fees become more commonplace to manage a landlord’s full range of needs.”