BTL2021: Brokers have a chance to build business with green credentials
Jane Simpson, managing director at TBMC, said: “Brokers should be discussing portfolios with landlord customers and looking at what properties are below a C rating, and then seeing how they can raise money, whether capital raising on that property or across the whole portfolio.
“There’s a really good piece of work that brokers could be doing, that’s going to bring in more business to them, and help landlords as well,” she said.
By 1 April 2025, when a new tenant goes in, buy-to-let homes must have an EPC rating of A to C. For existing tenants, the deadline is 2028.
Phil Rickards, head of BM Solutions, said: “For many landlords, the timescales could be a challenge. The green agenda is a threat to landlords and their cashflow in having to bring existing stock up to scratch in what could be seen as a relatively short period of time.
“Therefore any help lenders can bring — further advances to help improve properties, better rated products for higher EPC rated properties — will definitely evolve. It’s something we are working very hard on behind the scenes,” Rickards said.
Keystone Property Finance estimated that upgrading a property with a D rating to achieve an A to C rating would cost an average of £3,500, while for an E-rated property, it was £7,500.
Of Keystone’s lending book, about 57 per cent of landlords’ properties fall into the E and D category, 41 per cent are A to C, and two per cent are exempt such as listed properties.
David Whittaker, chief executive at Keystone, said: “Tenants will naturally gravitate to properties with a higher EPC rating, including for savings on utility bills, and therefore landlords might be able to get better rent.”
He said that in the residential market, Barclays, Natwest and AIB had developed offers for A and B rated properties. Meanwhile, “much respect,” was due for an innovative product from Ecology Building Society which offers 0.25 per cent discount for every energy-efficient improvement up to a maximum of one per cent. “I showed it to a pricing colleague who fainted on the spot,” Whittaker said.
He also praised Nationwide’s further advance green product.
In buy to let, Foundation Home Loans and Paragon won special mentions as first movers in green loans.
“At Keystone, we are just launching an A, B and C product focusing on older properties. We’re trying to incentivise landlords with lower-rated properties to do up their properties and improve them, and indeed if clients have a product transfer coming up, we will check the EPC. If it’s A to C, we’ll give you a better-priced product,” Whittaker said.
He added that sourcing systems enabling brokers to search with an EPC rating was “a work in progress.”
“You’ll see more product coming down the line from lenders. If you have a good green credential on your property, but you can’t find those lower prices, you’re all at sea,” he added.
The securitisations market was also supporting green lending, with investors showing interest in green asset classes.
BTL2021: Mini-boom and ‘really strong pipelines’ give BTL market positive edge – Rickards
Speaking at the Buy to Let Online Forum, Rickards (pictured) emphasised that the market had proved remarkably resilient over the last year and was on course to remain so.
Rickards added that 2020 was BM Solutions’ biggest year for new business since 2007 and its largest ever year for product transfers.
He also praised chancellor Rishi Sunak for not targeting the sector for tax rises and for including landlords in the payment deferral scheme.
“Has there been a mini-boom? Yes, there has, aided somewhat by the stamp duty holiday,” he said.
“It’s great to see the chancellor, for one of the first times I can remember, giving buy-to-let a step up.”
He continued: “I’m sure we all would have signed-up for last year’s market of £37bn just down from £42bn the year before.
“Nobody really knows what’s coming, but my prediction would certainly be for a market in the high £30bns maybe even early £40bns as buy-to-let completions and pipelines still look really strong – a good start to 2021 already.”
When asked about whether BM Solutions would be following-up the growing interest in environmentally friendly mortgage options, Rickards said: “The green agenda is high on everyone’s agenda so this is something that I wouldn’t rule out in the future.
“We are currently focussing on finalising the roll out of our new system with PTs next to market soon.”
Rickards concluded his session with a positive note on the market.
“There’s never been a better time to be a mortgage adviser, landlords need your voice more than ever,” he said.
“I’m cautiously optimistic about the future of the buy-to-let market. It’s been through lots of challenges and landlords themselves have shown how resilient they can be.”
BM Solutions head Phil Rickards to give market overview at The Buy to Let Online Forum
Rickards (pictured) will begin a day packed with speakers from key players in the market to give mortgage advisers and intermediaries insight into the buy-to-let (BTL) sector.
He will examine how the UK BTL market been impacted by the pandemic.
And Rickards will look at how landlords and lenders have reacted, where the opportunities lie now and how advisers should be positioning themselves to best cater for landlord clients.
Registration for The Buy to Let Online Forum is open now and free for intermediaries in the sector.
The event is taking place on Wednesday 21 April from 8.30am – 2pm and includes a new feature to book one-to-one meetings with business development managers (BDMs) and in some cases, underwriters from attending lenders.
Other subjects being discussed include key regulatory and fiscal changes, the growth of houses in multiple occupation (HMO) and a lender discussion panel.
Attendees can also interact live with speakers after each presentation, visit sponsors on virtual stands and network with colleagues.
To book at one-to-one video meeting with a lender during one of the networking breaks, contact the AE3 Media team at firstname.lastname@example.org.
To register to attend for free please visit the event website: https://www.mortgagesolutions.co.uk/events/buy-let-online-forum
Changes are coming: Esther Dijkstra, MD Intermediaries Lloyds Banking Group
From 1 January, Dijkstra took over from Mike Jones as managing director Intermediaries for Lloyds Banking Group looking after the Halifax, BM Solutions and Scottish Widows brands.
But the landscape couldn’t be more different to the one Jones had known. Inside of 12 months, the mortgage industry, used to working in busy offices, meeting at events, and driving miles to see clients and brokers moved online. The bank’s staff were forced to work from home and new mortgage lending for the entire market fell 10 per cent.
And as the pandemic brought some sectors like travel and hospitality to a standstill, other sectors which were able to transfer online have thrived. But that polarisation has made assessing mortgage risk much harder than it previously was before.
“The impact the pandemic has had on borrowers’ livelihoods and earnings has added an extra layer of complexity to lending when you also have to take into account furlough schemes and payment holidays, for example,” says Dijkstra “And because it is a health crisis and not a financial crisis, some sectors have been more heavily impacted than others.”
Combined with the reality that banks too had to turn their staff into home workers and move online meant Lloyds was juggling operational challenges at the same time as adapting its criteria to reflect new risks. More underwriters were recruited to deal with complex borrower circumstances.
“It’s been tough for us as well, but we have bounced back quickly to delivering the service and expectations that brokers have,” Dijkstra says.
Lloyds Banking Group will not release its new lending figures, but in the context of the market’s 10 per cent drop in lending, Dijkstra says the bank has “done very well”.
“As an industry we should reflect back on last year and think, wow we did all of that. We did all come through it and we worked together; valuers, estate agents, risk people, everyone.
“Everybody was flexible. It’s something to be proud of as industry, we managed to serve customers when the market closed and then when it opened back up again.”
The stamp duty holiday
Stamp duty is currently still driving the mortgage market forward at top speed, but Dijkstra has her eye on plenty of market-supporting initiatives that will keep lending buoyant when the scheme begins to taper off in June.
Her key focuses for 2021 are supporting first-time buyers, building momentum behind their equity release products and addressing the operational challenges and new ways of working brought about by the pandemic.
From mid-April, 95 per cent deals will be back on the shelves and Lloyds is one of five lenders that have committed to offering the mortgages.
“One of the biggest difficulties for first-time buyers is getting a deposit and 95 per cent is a big way of supporting them.” Dijkstra wouldn’t say if Lloyds had any direct involvement with bringing about the government-backed mortgage guarantee scheme that was announced in the Chancellor’s Budget. But she did say the bank lobbies government on behalf of the mortgage and housing market.
Higher LTV lending
The market is hoping that further support for first-time buyers will come in the form of higher loan to income multiples. This will mean those who need help the most are able to make use of the 95 per cent deals. Dijkstra wouldn’t confirm if enhanced multiples would be made available, except to say criteria was kept under constant review. Rates for the range are also still under wraps.
Another product range that the market can expect to see more of this year, says Dijkstra, is equity release mortgages through the Scottish Widows brand.
“There is a clear customer need here. People want to support their children on to the housing ladder, they are equity rich but cash poor. It’s a really good opportunity area not just for us, but for brokers too. As their customers get older they need to be able to help with ‘at retirement’ borrowing options.”
The plan is to scale up their equity release operation this year, using their business development managers to spread the word through brokers. Dijkstra is determined to grow the distribution of equity release mortgages in the mainstream mortgage market, and says it is currently too narrow and reliant on “two main distributors”.
“Our reasons for entering the market are to address customer and regulatory concerns and offer the flexibility that’s being asked for.
“But you have to be in the market to support that change. I think about it terms of swimming, you can read books about it and watch people doing it but unless you are in the water and you start to swim, you won’t be able to do it and you will drown.”
A huge operational challenge for Dijkstra is to decide which parts of Lloyds’ lockdown working life will remain, and which will return to pre-pandemic norms and how the bank interacts with brokers is a major focus.
With the vaccine roll out in progress, her team has started to look at new ways of working. They want to find how the way in which customers and brokers want to interact with the bank has changed bearing in mind the national mood that a work/life balance is more of an expectation now rather than an aspiration. Behind the scenes they are already experimenting with new approaches.
Dijkstra says the bank is already reviewing the number of offices it has and whether they will still be needed and she is sure other companies in the mortgage sector will be doing the same.
“We have a brilliant opportunity to redesign how we work and to do it from everyone’s perspective, the broker, the BDM, the national account manager, networks and mortgage clubs.”
One role destined for long-term change is the BDM.
“When I practically think about BDMs, do I think that we will all jump back in the car and get on the road, no. There will definitely be a hybrid [solution].”
She says it’s difficult to design how the job role will look on paper so it will be a case of trying new ways and finding out what works best.
For now, Dijkstra and the intermediary team will be working full throttle to support brokers and borrowers as the stamp duty extension prolongs the mayhem for a few more months. But as the bank crosses the half year line, mortgage brokers can expect to see much change across Lloyds’ trio of brands.
NatWest and Halifax cut rates; Platform caps maximum LTI – round-up
Two-year fixed purchase mortgages have seen rates cut up to 10 basis points. The fee-free product at 85 per cent loan to value (LTV) has dropped from 2.93 to 2.83 per cent. The fee-free offering at 90 per cent LTV has decreased from 3.48 to 3.43 per cent.
Remortgaging borrowers fixing for two years have seen rate reductions. These include the £0 fee product at 75 per cent LTV, on which rates have reduced by 11 basis points to 1.78 per cent.
At 90 per cent LTV, two-year fixed remortgages have seen cuts of 0.15 per cent to, respectively, 3.24 per cent and 3.44 per cent for the £995 paying and fee-free products.
For borrowers fixing for five years, the fee-free purchase product at 85 per cent LTV has been cut to 3.07 per cent from 3.15 per cent.
Brokers wanting to secure current rates have until 10.30pm tomorrow to produce mortgage illustrations and submit applications online. If brokers are unable to submit applications due to technical issues that cannot be resolved over the phone, they must submit a paper application and email their business development manager by midday.
Platform caps maximum LTI
Platform has reduced the LTV its maximum income multiplier can be considered for from 75 per cent LTV to 70 per cent LTV.
Borrowers requiring loans up to the threshold can borrow up to 4.85x their income while anyone with requirements above 70 per cent LTV and those using Help to Buy will have borrowing capped at 4.49x their income.
The change applies to applications submitted from 1 March.
Platform has re-introduced its Help to Buy mortgages at 60 per cent LTV and 75 per cent LTV with two and five-year fixes.
All products have £500 cashback and free valuations. At 60 per cent LTV, rates for both two and five-year fixes with a £999 fee are 1.79 per cent. At 75 per cent LTV, rates are 1.95 per cent.
For fee-free Help to Buy products, rates are 2.02 per cent at 60 per cent LTV and 2.2 per cent at 75 per cent LTV.
The lender has also relaunched fee-free mortgages at 60 and 75 per cent LTV, with two- and five-year fixes.
Elsewhere, Platform has reduced rates on residential, professional and mainstream mortgages by up to 0.12 per cent. Product switches for residential and buy-to-let mortgages have seen rate hikes of up to 0.19 per cent.
Halifax and BM Solutions
Halifax has reduced rates on remortgages.
Meanwhile Lloyds Banking Group’s buy-to-let brand BM Solutions has increased the rate of a five-year fixed at 75 per cent LTV with a £999 fee. The product transfer now has a rate of 2.21 per cent.
Landlord confidence rebounding with smaller portfolios leading the way – BM Solutions
It appears landlords with smaller portfolios are particularly pleased with their business prospects and profitability, research from the survey on behalf of BM Solutions found.
Of the landlords with between one and four properties, net profitability has risen for the past two consecutive quarters and is now at its highest point for four years, with 85 per cent making a profit, up 11 per cent from Q3 2020.
Encouragingly no landlords expected to lose their lettings business as a result of the pandemic, and only a third expected they would be negatively impacted by the pandemic – down from 56 per cent at the start of 2020 when the coronavirus first arrived.
And small landlord confidence in the UK private rental sector and their own letting business is now higher compared to the same point 12 months ago.
This was echoed in the wider survey encompassing landlords with portfolios of all shapes and sizes, where 35 per cent felt upbeat about prospects for the next three months.
Other key points from the overall Q4 research included one in five landlords intending to sell a buy-to-let property in the next year, down from a quarter in Q3.
And 16 per cent plan to buy a property in the next 12 months – a slight increase on the figure from the previous survey.
Half of the landlords expect to use a limited company for their next property purchases while just over a quarter of BTL borrowers intend to remortgage in the next 12 months.
Landlords were also more confident in the short-term for capital gains and rental yield increases, with these measures up seven per cent and four per cent respectively year-on-year.
Tenant demand reached its highest point for five years with a third of landlords reporting higher demand over the last three months, although those based in London were most likely to face falling demand.
BM Solutions head Phil Rickards said: “This quarter’s findings really show what a difference a year can make as they paint a more positive picture for the buy-to-let (BTL) market, with more landlords reporting a profit and 16 per cent intending to acquire more properties in the next 12 months.
“Undoubtedly the economy still faces wider challenge, but the resilience of the BTL market that we have seen time and time again in the past is showing positive signs of bouncing back.”
Halifax and BM Solutions make second set of rate cuts in a week
Halifax’s changes have been made to its homemover and first-time buyer products.
Selected rate reductions have been made on two and three-year fixes across 60-75 per cent and 80-85 per cent LTV deals.
And some five-year fixed rate products have also had rates cut across 60-75 per cent and 80-90 per cent LTVs.
Meanwhile, BM Solutions has made reductions to it buy-to-let remortgage and let-to-buy ranges at £0, £995 and £1,995 fee options.
Two-year fixes have been cut at the 60 per cent and 75 per cent LTV bands, while five-year fixes have been reduced at 75 per cent LTV.
The lenders did not give details of the magnitude of the cuts.
Earlier this week both lenders made changes to their rates with Halifax adjusted products in its remortgage range and BM Solutions cutting its remortgage, let-to-buy and product transfers.
Halifax and BM Solutions cut rates
Halifax has adjusted products in its remortgage range with some rates increasing by up to 0.14 per cent and others cut by up to 0.17 per cent.
The remortgage deals affected include affordable housing shared equity products and shared ownership scheme.
The lender did not give any examples of specific product changes.
Meanwhile, BM Solutions has also overhauled its buy-to-let mortgage rates.
Remortgage and let-to-buy products saw a range of reductions across two-year fixes at 60 per cent and 75 per cent loan to value (LTV) and five-year fixes at 75 per cent LTV.
The cuts were applied to products with £0, £995 and £1,995 fees.
Product transfer deals at 60 per cent LTV with £995 fee also had rate reductions, while the 75 per cent LTV versions were increased.
And the lender aligned its further advance rates with its two-year 75 per cent £0 fee product transfer deals.
Ex-Lloyds intermediary MD Mike Jones joins MAB
Jones, age 57, will serve on the audit, remuneration, nomination, and group risk committees.
He joined Lloyds Bank plc in 1985 and retired from Lloyds Banking Group plc (“LBG”) at the end of 2020 most recently as managing director, intermediaries and specialist brands.
His primary role was leading the Halifax, BM Solutions and Scottish Widows Bank business development teams working with mortgage intermediaries across the UK. Jones chaired the LBG Housing Forum, the LBG intermediary conduct forum and was responsible in the UK for Birmingham Midshires, Scottish Widows Bank and Intelligent Finance. He was also responsible for LBG’s European retail bank operating in Germany and The Netherlands, a role that sees him continue into 2021 as chair of the supervisory board of Lloyds Bank GmbH following his appointment in March 2019.
Peter Brodnicki, CEO of MAB, said: “I am also delighted to welcome Mike to the Board. His leadership, vision, and strategic thinking at the UK’s leading lender has shaped the intermediary and lending markets that exist today, and his appointment reflects the huge ambition of this business.
Jones said: “It will be great to do something I know and love with a company and people that I am excited to be involved with. I know the way they think, they have great plans and believe I can bring some value.”
There are businesses that tell a good story and there are businesses that get things done. MAB is at the forefront of leading change and is definitely one of the latter, he added.
On the housing market through 2021, Jones agrees that this could be a year to match 2007 for its mortgage lending high given the momentum built up and in the pipeline.
“Activity levels have been high across the market following the first lockdown last spring and there are very high numbers of mortgages still to complete in 2021, not least brought about by the looming stamp duty exemption deadline,” he said, adding that vaccinations are now giving an increasingly clear exit route out of the pandemic.
“The Covid vaccination roadmap laid out by the government is building confidence and I think that there is a high probability that this will become an annual jab like the flu vaccine. If so, then I’m optimistic that Covid becomes much more manageable and contained. Let’s hope so, the interesting question then becomes how many will go back to their previous way of life? How many habits have been changed by our experiences of the last year? That’s the big unknown.”
BM Solutions adds valuation API as part of portfolio portal update
It has removed the previous customer profile form enabling brokers to key information directly through the portal and introduced other technology including an application programming interface (API) using Rightmove data to provide property valuations.
The lender said the new functionality followed broker feedback and would make it easier for intermediaries to submit portfolio landlord information.
Phil Rickards, head of BM Solutions, (pictured) said: “We are always listening to feedback from brokers and now more than ever it’s vital for us to be turning that feedback into action.
“By removing the customer profile form we are making it even easier for brokers to submit portfolio BTL business to us and our dedicated portfolio support team are also still on hand to help make the process even smoother.
“Last year was an unprecedented year and I’m really pleased to have been able to offer high levels of support for the intermediary BTL market.”
BM Solutions introduced a new system for new mortgage business in late 2020, with product transfers, further advances and transfer of equity scheduled to move to the system during 2021.