Soon there will be little room for vanilla buy to let – Goodall

by: John Goodall, CEO and co-founder of Landbay
  • 13/02/2018
  • 0
Soon there will be little room for vanilla buy to let – Goodall
The current buy-to-let (BTL) environment is one of ambiguity. House prices plateauing across the UK continue to dampen widespread expectations and increase the uncertainty that comes with reduced capital appreciation.

For this reason, a landlord purchasing a property today will likely focus on yield rather than an anticipated rise in the value of the underlying property.

According to our 2017 National Rent Review, rents over the last 12 months have, in most parts of the UK, not kept up with the rate of inflation. Indeed, in London, all boroughs bar seven saw average rents fall in 2017.

Without sufficient return on yield, landlords can quickly find themselves in hot water, as associated legislative and maintenance costs climb.

As a result, many are setting their sights on HMOs or properties outside of London, where yield is typically much greater.

 

Commercial loans on residential property

And the great deal of change over the last year means the buy-to-let sector is now one that generally places a greater importance on more responsible lending.

As market guidelines and government legislation drive towards the increased professionalisation of the sector, lenders and brokers must improve their service and knowledge of the industry to power a more specialist buy-to-let environment.

This increased attention and care required to process applications has meant that buy-to-let mortgages are increasingly becoming more like commercial loans, albeit secured on residential property.

Prior to these changes, specialist lenders were almost part of a unique sub-sector of the industry. However, over the last 18 months, specialist lending within buy-to-let has become more mainstream and will, I predict, become the backbone of buy to let over the next three years.

 

No room for vanilla BTL

The term specialist buy to let is not as distinct as it once used to be.

Instead, lenders must turn to alternative ways of standing ahead of the competition and brokers too have an opportunity to add value in a market that is still adjusting to the new rules.

By keeping on top of updates and working with lenders to educate themselves on key borrower concerns, they can provide a premium service to borrowers that cements them as their broker of choice.

This will be vital in a market which soon will have little or no room for the standard buy to let.

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