Results from Shawbrook bank’s lending barometer revealed that 28% of commercial brokers and 19% of residential brokers saw lending restrictions as their biggest challenge. No-where is this more obvious than in buy to let.
Adrian Dadds, managing director of St Georges Finance, said lending restrictions introduced for buy to let are having a wider impact, especially as landlords with large portfolios are being treated in the same way as those with one or two properties.
“A developer client has some flats and would like to retain some of them, but he’s probably going to be able to raise half a million less now than he could before because of the new rules. It’s going to be a real challenge for the buy-to-let market,” said Dadds.
He added: “Where people are coming out of deals there is a real challenge of what they do – do they go into standard variable rates and get stuck? They’re not going to be able to refinance.”
The rest of the market is performing well. “There’s a real split in the market. Development finance is good and there are new lenders coming to the market. Commercial mortgages are pretty good and we are seeing pricing coming down a bit now the likes of Atom have come in. But buy to let is being crucified.”
He added that in the medium to long term the market will adjust and new products are likely to be created to tackle the issues landlords are facing. “It may mean focusing on high net worth individuals who have the flexibility and can bring in other income to bolster it.”
Meanwhile, Maeve Ward, managing director of residential mortgages at Shawbrook, said residential mortgage brokers are raising concerns around lead generation. She attributed this to “a lack of customer awareness of products such as second charge mortgages” and said brokers need to drive forward awareness and education to increase confidence in the market.
Tim Wheeldon, chief operating officer at Fluent for Advisers, agreed that work needs to be done to improve second charge lending.
“I believe that the issue should not just be laid at the door of consumers for being unaware of its existence. The reason that consumers go to brokers is because they need guidance as to their best path,” he said.
“If anything, as an industry we need to concentrate on helping brokers feel confident enough to know when and where a second charge loan is appropriate to a particular client. There is certainly no lack of remortgage leads being generated. What we should all be asking is how many of those remortgage enquiries, would be better completed as second charge loans, if advisers felt more confident about the sector?”