In a one-to-one with Specialist Lending Solutions’ editor Owain Thomas, Tugwell acknowledged there was a need for the regulator to investigate the sector and examine the appropriateness of fees charged in it.
He also noted that smaller landlords had started to return to the buy-to-let sector after having a hiatus to understand the swathe of new rules and regulations.
And following a successful 2017 growing its loan book and extending distribution agreements with networks and mortgage clubs, Tugwell added that Together was in discussions to add further arrangements.
It’s no surprise
Speaking to Specialist Lending Solutions, Tugwell agreed on the importance of oversight in the second charge market and noted that former FCA mortgage manager Lynda Blackwell had “a major point” about its concerns.
“There’s a need for fees and retained fees and broker fees to be looked at in general in that market, it’s no surprise and I think the review is a good one but needs to be done in the right way,” he said.
“I hope it wouldn’t overshadow the need for a second charge product. There’s all sorts of reasons why a second charge might be best, but it needs to be done properly and it needs to be done fairly and we need to have the right customer outcomes on the back of it.
“So I think the review is well positioned, but I want to make sure it considers the need as well as the way it is served,” he added.
The lending community has also been under examination by the FCA but Tugwell said Together was very comfortable with the fees it charged, that are set by brokers “and that ultimately are paid by customers”.
“We’re comfortable we’re in a good position there,” he continued.
“We have our oversight and governance in place to make sure brokers adhere to that.
“The review will cover that in detail and I think it will make sure that the awareness of what is fair and what is reasonable is highlighted,” he added.
Return of smaller landlords
The buy-to-let market has also been impacted by regulation, but Tugwell believes despite generally gloomy predictions there may be some resurgence from those with smaller portfolios.
This, he suggests, may well be driven by poor savings rates for cash making property remain an attractive investment vehicle.
“There’s definitely been a slowdown in new landlords coming in, the ones with one or two properties that people were invested in, although that’s recently started to pick up again,” he said.
“The early signs are that the smaller buy-to-let investor hasn’t been completely cut off by the changes, having time to think about it and what to do next.
“I‘m encouraged by the fact that people are coming back in, but I think they are coming back in with their eyes more open and their ability to understand the implications more honed, and that’s for advisers and customers alike,” he added.
A market that needed change
Another of the regulations to hit landlords is due in April with tighter restrictions around energy certificates for rented properties.
This has garnered less attention than the tax and portfolio lending changes, but could still have a notable impact.
Tugwell is unsure what the impact will be, but Together has been preparing to make sure all its underwriting processes are in place.
“There are some very good systems out there that help the broker list exactly what they are looking at and allow lenders to see that in a very easy format – so we’re working with them to see how we can get the business presented in the right way,” he said.
“So it’s another regulation change and it’s a complex market, but it’s one that needed a rejig. No regulation is bad as long as people understand it and can use it properly,” he added.
Network and club rollout
Last year was a positive one for Together as it grew monthly lending totals and took its loan book to more than £2.5bn.
After spending some time working predominantly with specialist packagers it is now rolling out to network and mortgage clubs – and is in discussions to broaden its pa.
“Our numbers are going well and our aim was to extend distribution,” he said.
“We’re trying to open up distribution to clubs and networks in particular to give brokers a choice – package or come to us direct.
“We’re in discussion with others too because as far as we’re concerned it’s about widening distribution so that as many brokers as possible understand the specialist market,” he added.
The lender is seeing many brokers using it for the first time and finding a growing awareness that there are lots of clients that the specialist sector can help, which the high street lenders are unable to.
In particular it is those with several unusual elements, perhaps being self-employed, high net worth, borrowing into retirement, or interest-only that are coming most regularly.
“If they’ve got two of those things, the chances are the high street is not the place for them,” Tugwell concluded.