Buy-to-let landlords moving to limited company and HMOs, brokers say

Speaking on the masterclass, Karl Wilkinson, founder and CEO of Access Financial Services, said that it had been a challenging year for the buy-to-let landlords and the market in general, with several buy-to-let brokers ceasing trading.

Wilkinson continued that he had seen a lot of portfolio landlords who were selling their stock off or selling half their stock to reinvest money into the remaining portfolio, and noted that smaller buy-to-let landlords with one or two properties were struggling to remortgage as interest rates were high.

However, he said that some buy-to-let landlords were shifting towards multi-lets, houses in multiple occupation (HMO) and multi-unit properties.

This was echoed by Greg Cunnington, chief operating officer at LDN Finance and LDN Private Clients, who added that the firm was seeing a lot of HMOs, student lets and offshore and expat business.

“The big shift we’ve seen is nearly all purchases now on a limited company basis, whereas before it was more like 50/50. There is also a sophistication on those limited companies, so it’s not just your £70 off the shelf Special Purpose Vehicle, there’s now typically layered structures, there’s kids’ names on the documents with 10 per cent shares in the company.

“We’re finding that we’re having to use lots of the more specialist lenders in that space to back up the structures landlords want to put in place,” he explained.

Buy-to-let landlords ‘struggling’

Jodi Spreadbury, senior mortgage and protection adviser and head of lender relations at The Mortgage Broker, continued that bigger portfolio landlords who have the reserves and the equity are not struggling as much.

However, smaller landlords with one or two properties who bought in the last 10 years with high loan to values and not great rentals are the “ones who have really struggled”.

“Limited company enquiries are definitely up, nobody seems to think that buying in a personal name is sensible anymore,” he added.

She noted that there were “more options than there ever used to be” from specialist lenders offering limited company loans.

“It’s just whether clients can get their head around the pricing of those specialist lenders and it’s looking at it more as a long-term investment rather than a short term, it’s not the ‘Del Boy make a quick buck’ solution that it was maybe 10 years ago, when you could buy cheaper properties and hope they were going to increase in value almost overnight,” Spreadbury added.

Fall in buy-to-let rates will be vital for market recovery

Wilkinson said that looking ahead to 2024, there was still a lot of people out there, like first-time and second-time landlords who always had a “dream” to own property.

He continued: “There’s always going to be that passion within the buy-to-let industry, and I think as rates start to come down in that market, we will start to see a positive shift towards more people buying but again, I can see rents going up and that’s the only way that that these rental calculations are going to work.

“It might be that lenders start to introduce even more products that take into account their income, their employed or self-employed income as well. So, in 2024, I think is going to be an upward shift and more purchase business.”

Cunnington agreed that as rates got lower, that would be “genuinely helpful”.

“You had a lot of lenders with fantastic like-for-like remortgage products just before they increased interest rates. That’s getting closer to working again, which will be great to open up more options.

“I think a lot of specialist lenders have made sure they’ve got product transfer options in place, which I know is tricky with the securitisation in the background,” he added.

Cunnington called for more top slicing options from lenders, highlighting Barclays and Clydesdale Bank who do “pure affordability” on buy to let.

“I get there’s a lot of compliance issues and lenders who feel it’s a big risk factor but actually I think if you have the right controls in place and the right client, more top slicing options would be great for the buy-to-let market,” he said.

The 46:56-minute session covered mortgage pricing, buy-to-let market, later life lending and Consumer Duty. The session is hosted by Anna Sagar, reporter at Mortgage Solutions, and Shekina Tuahene, commercial editor at Mortgage Solutions. The expert panel included Greg Cunnington, chief operating officer at LDN Finance and LDN Private Clients, Jodi Spreadbury, senior mortgage and protection adviser and head of lender relations at The Mortgage Broker and Karl Wilkinson, founder and CEO of Access Financial Services.