Ahead of the event, we sat down with Richard Rowntree (pictured), managing director of mortgages at Paragon Bank, discusses the professionalisation of the sector, net zero, affordability, pricing and opportunities and challenges for the year.
The Buy To Let Market Forum kicks off on 19 April in Bolton with events also taking place in Worcester, Cardiff and West Sussex.
To register for the event and find out more follow this link.
Q: As a buy-to-let specialist lender where does Paragon see the most opportunity? Are there areas it is planning on growing?
A: The private rented sector and the landlords who operate within it are becoming more professional. This is a trend we have noted over the past decade but has accelerated in more recent years. Many of our customers operate like an SME, employing people to help them manage their portfolios. As a lender that focuses on this segment of the market, we are well placed to support this cohort of landlord customer.
The net zero agenda is also clearly an opportunity, as well as presenting challenges. Landlords will need to upgrade their existing properties, although they are increasingly targeting more energy efficient homes when purchasing new property. The retrofit market will be significant, and we hope to be in a position to launch a proposition for this in the near future.
Q: Regarding affordability, does there need to be more product innovation/how can buy-to-let lenders address this challenge?
A: The market needs more innovation generally, so yes. Affordability is part of that innovation mix and choice is key here, being able to offer landlords a range of options to suit their needs.
For example, some landlords may wish to opt for a lower rate and a higher fee, or conversely a lower fee and a bit more on the rate. Interest Coverage Ratio also forms part of that equation. The important thing is they have the choice.
However, landlords have proven their ability to adapt their business models to reflect market conditions, and this is the case today.
Q: What are expectations around buy-to-let pricing?
A: It’s clear the ultra-low interest rate environment of the past decade or so is over. We all knew this was coming but the mini Budget ripped the plaster off, rather than the gradual uphill rate gradient the market was expecting. That caused market turmoil, but the waters have steadied in more recent months and landlords have, on the whole, adapted. To my earlier point, it is the more experienced portfolio landlords who have perhaps adapted the best and the higher-rate environment may make it more challenging for smaller-scale landlords or new entrants in the short term.
Q: Will lenders be eyeing specialist buy-to-let lending?
A: There is always the potential for this because it’s an attractive part of the market and the amateur demand may be more muted in 2023. However, there is a world of difference between mainstream and complex buy-to-let and switching between the two is not at all easy.
We have developed our proposition over nearly 30 years of buy-to-let lending and the specialist end of the market requires a completely different approach. Additionally, the proposals made through Basel 3.1 could make this transition more difficult.
Q: Where are the headwinds and opportunities for brokers over the next 12 months?
A: This year will be another fascinating one for the market. The remortgage opportunity is huge as five-year fixes taken out in 2018 mature, whilst I would also expect to see more landlords opting for incorporation, particularly with the changes to the income tax thresholds bringing more people into the additional rate band.
For landlords, they continue to enjoy record tenant demand for their product, but they will be mindful of how the Renters Reform Bill passes through parliament and the details within that. Plus, they will want to hear more clarity on the government plans for EPCs.
Louisa Sedgwick, commercial director of the mortgage division at Paragon, will be speaking at The Buy To Let Market Forum.
