Despite these challenges the sector is still a vital part of the mortgage market and buy-to-let loans make up 15% of all lending. That’s significant in anyone’s eyes.
So lenders and brokers who turn their attention elsewhere will be missing out on material revenue streams.
On top of that, the hike in stamp duty and gradual dialling down of mortgage interest relief are having less of an impact in some parts of the country.
Therefore, blindly assuming landlords are not buying in your area could be a serious oversight.
Making the sums work
Landlords in London and the South East are finding it most difficult to make the sums work and therefore will be the most cautious about adding to their portfolios.
On the other hand, in regional cities such as Manchester and Liverpool where houses prices are growing strongly, entry costs are low and the yields remain attractive, landlords are continuing to invest.
To take advantage of this shifting trend, lenders and brokers need to understand the dynamics of these local markets.
That means learning where the opportunities are, where the risks lie and whether or not a client can afford to take out a new loan in that area.
Since the introduction of the new Prudential Regulation Authority (PRA) rules CP11/16, lenders have had to conduct more in-depth affordability checks on portfolio landlords with four or more properties.
By definition, that means the whole process of granting a loan is slower than it used to be.
Informed lending decisions
But that does not mean lenders and brokers cannot do anything to speed things up.
For lenders, automated valuation models (AVMs) that can value multiple properties in a portfolio quickly, efficiently and accurately are one way of doing this.
Hometrack, for example, provides an individual valuation and rental estimate for each property in the landlord portfolio.
Crucially, lenders can use this information to fully meet the PRA requirements.
By adopting AVMs, lenders can be confident they have an accurate view of the landlord’s total collateral exposure and affordability, and are able to make an informed lending decision.
This sort of automation and innovation will help keep the buy-to-let wheel turning, so it is important lenders and brokers consider whether they have the right systems in place to adapt to the changing nature of the market.