The lender, which is operated by the Computershare Loan Services group, is approaching the end of its first year in the market after formally launching in December.
In an exclusive interview with Specialist Lending Solutions, Zephyr Homeloans managing director Paul Fryers (pictured), says the lender was satisfied with how its first year had gone.
“We always anticipated this would be a very competitive market, so that hasn’t surprised us,” he says.
“It’s an ever increasingly competitive market, so it’s very important for lenders to be mindful of that, and consider how, alongside their mortgage product, proposition and service, they can work with brokers and customers to add further value.”
That competitive market also applies to product prices and rates, which Fryers does not believe can go much lower.
“I think things are priced quite tightly, so the ability for the market to absorb further reductions in rates charged to customers is potentially a little bit questionable,” he continues.
If the competition does intensify further, Fryers admitted that could lead to more lenders dropping by the wayside.
“The creation of a scalable business is extremely important, and if a lender or player isn’t able to achieve scale then it calls into question their place in the market.
“That said, the buy-to-let market does call for niche products in some ways, such as specialist property types and sectors which are obviously part of a very big market.
“But whether a lender could build a scalable business on overall relatively modest volumes remains to be seen,” he adds.
No competition concerns
Being such a new entrant to the market and trying to establish itself, some may gaze at Zephyr as one lender which could be vulnerable to the competition.
Fryers is tight-lipped on how much business it has completed, but says there are no concerns about its immediate future, adding all its plans are for a long-term place in the market.
“We’re a young business in a big group so we’re progressing through our growth plan which is a long-term plan to really build out as a significant part of the Computershare group,” he says.
“Having got the business through its first nine to 12 months we’re looking to increase our presence.
“We’ve been working hard with our existing distributors and we’re also working with new distribution relationships and those are in the process of being rolled out at the moment.”
There has been a chance to learn in this period though.
Fryers admits that the complex circumstances present in the modern buy-to-let market mean it can be a longer process than desirable to get a deal all the way through from inception to completion, with conveyancing a key part of that.
And he notes that while there has been a well-recognised bias towards five-year fixes which has been reciprocated in its completions, this is now starting to show signs of edging into even longer products.
“We’ve started to see in the last few weeks some interest in the longer-term fixed rate space,” Fryers says.
“I think it’s largely embryonic, but for example we have a seven-year fixed rate product and we’re starting to see a bit of an uptick in that over the past few months.
“We’re comfortable with the product we’ve been offering but we’re not sitting on our laurels and are always considering other angles.”
He continues: “I wouldn’t want to suggest I’m anticipating a sea-change, but also we are in fairly unchartered territory in the country so it may be natural for customers landlords to start to think a little bit longer term.
“It’s an interesting one to keep an eye on and I’m aware other lenders have been bringing out 10- and 15-year products.”
Breaking into the broker market is vital for a buy-to-let specialist lender, with the vast majority of lending completed through an intermediary, and this is clearly Fryers’ next target.
“There is a market opportunity to develop a long-term business is there.
“The tax and regulation changes are creating more of a professional space with landlords in it for the long-term building a broader investment portfolio.
“So the need for specialists in this market and for networks to have access to specialists, whether it be distributors or lenders, is very obvious, and it’s been a good experience so far,” he concludes.