However, speaking on Mortgage Solutions Television in association with BM Solutions, the broker said these clients were unaware they could be helped with product transfer deals.

Coreco managing director Andrew Montlake said: “Landords might be nervous about coming forward, because they might have applied in a very different market when things were a lot easier, they might be siting on legacy rates.

“So they are a bit concerned if they put their head above the parapet.”

He noted that the buy-to-let product transfer market had not taken off yet, but it was starting to, although lenders could offer more flexible products as many landlords did not know if they were going to keep the property or sell it.

Phil Rickards, head of BM Solutions, added that the lender did have a lot of customers sitting on the SVR and that it was a great opportunity for brokers and customers.

Speaking on Mortgage Solutions Television in association with BM Solutions, Coreco managing director Andrew Montlake noted how important it was to have a diverse strategy.

Montlake was responding to concerns about the volume of five-year fixed rate deals being completed in the buy-to-let sector and how this could hit the broker market.

“Let’s be frank, a lot of it is down to clients wanting a certain level of gearing on their properties and at the moment in a lot of cases it only fits on a five-year fix basis,” he said.

“But in terms of filling the gap, as brokers most of us do this anyway, you’re constantly looking at the market, you’re constantly looking to see how can you service your clients better?

“If that section of the market stops where are the other sections of the market? You’ve got to be constantly looking at things.

“I think we’ve all learned painful lessons from the past where you put all your eggs into one basket, but there’s no proof that market always continues. So you’ve constantly got to be adapting,” he added.

The panel comprised:

Victoria Hartley, group editor, Mortgage Solutions

Phil Rickards, head of BM Solutions

Andrew Montlake, managing director, Coreco

Doug Hall, director, 3mc

Phil Rickards, head of BM Solutions (pictured), said: “The short answer is that it has been over-hyped. We’ve all seen press coverage of the dramatic growth of limited company BTL. But it’s predominantly written on purchases, a sector that’s shrinking, it’s just over 20 per cent of the BTL market, therefore that growth is on a smaller percentage of the market.”

“We’re concerned that brokers might believe the hype and just pick an off the shelf BTL product,” he added.

Andrew Montlake, managing director, Coreco, said: “I’d echo that it’s definitely just a purchase thing. Predominantly for remortgages, where it’s in a personal name, they are not changing it to limited company, it is complex and it is expensive in some cases.”

“The first thing we say is make sure you get independent tax advice and then we can do it whichever way is best for them,” Montlake said.

The panel comprised:

Victoria Hartley, group editor, Mortgage Solutions

Phil Rickards, head of BM Solutions 

Andrew Montlake, managing director, Coreco

Doug Hall, director, 3mc

Speak to any landlord and they’ll gladly tell you about the challenges they’ve faced over the last few years. The Stamp Duty surcharge, restriction of tax relief and new lending rules, to name but three, have all made letting to private tenants less attractive and arguably less profitable.

But property investors are not the only ones coping with change in the sector.

Lenders have also overseen a seismic shift in both their products and their processes to keep pace with regulatory and government interventions. And the dust hasn’t settled quite yet.

Across the market, they are still regularly adjusting their pricing and lending criteria, not only in response to rule changes, but also in an attempt to win more business in a very competitive market, the emergence of new specialist lenders and sub-sectors such as short-term lettings grabbing the attention of more established landlords.

It’s a moving picture and the best buy-to-let lenders are moving with it, adapting our propositions to stay competitive as well as compliant.
It’s good news for landlords because competition in the buy-to-let sector means better rates, lower fees and a more flexible approach to lending, within the new rules.

But what does it mean for brokers?

Intermediary impact

You’ve had a huge amount of change to manage too, of course.

By now, you will have got to grips with the new Prudential Regulatory Authority (PRA) rules on affordability and portfolio lending introduced in 2017.

But in fact they marked the beginning, not the end, of a process.

The PRA rules represented a significant regulatory challenge, but lenders have been evolving their propositions ever since, particularly so this year. Now the new processes have bedded in, we’ve all had the opportunity to look at the landscape anew and see where improvements can be made.

In 2019, we have seen a different landscape indeed including increased LTV lending, an increase in limited company and more top-slicing across the buy-to-let sector.

Many of the changes have provided more options for your landlord clients, which is why it’s so important to keep up to date with changes.

Opening access

The latest change from BM Solutions, for example, is the extension of our maximum property limit from three buy-to-let mortgages held across Lloyds Banking Group to five. This will open up access to our mortgages to many more of your landlord clients including portfolio landlords with four or five properties.

In line with the change we’ve increased our maximum lending limit from £2m to £3m across the group.

We made this decision because brokers have told us that they have high quality landlords’ clients with standard needs, whose only barrier to a BM mortgage was that they had already reached their property limit with us. These clients would have preferred to add to their borrowing with us, but were unable to.

We’ve listened and made the change so that your clients can access competitive traditional deals from a lender they trust.

Stay up to date

So how do brokers ensure you are up to date with all the lender criteria changes across the market?

Your sourcing system should be accurate but it also helps to have an overall grasp of what lenders will offer.

Your network or mortgage club will usually inform you of criteria changes, so always keep up to date with the communications they send.

Lenders will also keep you notified of how their criteria are changing and a good BDM will talk you through how that will affect your clients.

Speak to your peers, read the trade press and follow key mortgage commentators on social media so you don’t miss an announcement.

As the market becomes more segmented and new lenders offer solutions for complex landlords at a premium, there remains a large core market of buy-to-let borrowers who want a traditional transparent mortgage.

Lenders are still changing their criteria as the new lending regime settles down, and BM Solutions is committed to making its mortgages more widely accessible.

Make sure you are on the front foot when it comes to finding the best solutions for your clients.

For the use of mortgage intermediaries and other professionals only
If you do not have professional experience, you should not rely on the information contained in this communication. If you are a professional and you reproduce any part of the information contained in this communication to be used with or to advise private clients, you must ensure it conforms to the Financial Conduct Authority’s advising and selling rules. Birmingham Midshires is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628. This information is correct as of August 2019 and is relevant to Birmingham Midshires products and services only.

In April, Specialist Lending Solutions revealed that the lender was looking at its options in this area and it has now confirmed an extension of these limits.

From 12 August, BM Solutions will increase the maximum number of buy-to-let mortgages from three to five with Lloyds Banking Group, as well as the maximum value of buy-to-let mortgages from £2m to £3m.

The portfolio limit will remain at 10.

And following a pilot, a web chat service will also be available to help brokers with queries, providing real-time support and an alternative point of contact for business development managers.

Phil Rickards, head of BM Solutions, (pictured) said: “With improvements delivered to our portfolio underwriting proposition, now’s the right time for us to take our next step to bolster the buy-to-let market – and demonstrate our ambition to be the brokers’ first choice.

“Along with greater choice and flexibility for landlords, making web chat live for brokers means we can provide help and support in the ways that they want, when it best suits them.”

The last 11 years have been a challenge for landlords in anyone’s book.

When you compare the post-credit crunch market to the booming early and mid-noughties, the difference is stark.
Then, people were clamouring to jump on the buy-to-let bandwagon, house prices were rising, lending was flexible and government and regulatory intervention was infrequent to say the least.

Now, some landlords are leaving the sector, others putting a halt on expansion, house prices are stuttering and the red tape just keeps on tightening, squeezing landlords’ profit a little further with each new measure.

It has certainly got tougher, following a swathe of new rules and regulations for landlords and lenders that, frankly, make investing in property to let less attractive. These include the withdrawal of tax relief on mortgage interest payments, PRA minimum underwriting standards and the Stamp Duty surcharge, to name but three.

But, while there’s no denying landlords are having a harder time when compared to the recent past, are we really seeing the slow demise of buy to let?

Bigger picture

We can see more clearly what’s happening in the Private Rental Sector when we step back and look at the bigger picture.
It’s important to recognise that the period from the mid-nineties until 2007 actually represented a boom for landlords rather than the long-term trend.

In fact, when we look further back – over 100 years – we find a cycle of downturns and booms, interspersed with government interventions. The Private Rental Sector grows and government steps in to protect tenants and restrict landlord profits. Eventually supply can’t fulfil demand and the Private Rental Sector rises again.

It’s a cycle that looks pretty similar to what we’re going through now.

A potted history of the Private Rental Sector

At the start of the 20th century, the Private Rental Sector was flourishing. Most Brits rented property and the majority of lets were private.

The next century saw repeated highs and lows for landlords, with two world wars contributing to a lack of supply in properties generally (housebuilding was halted during The Great War and homes demolished by bombs in WW2).

This, in turn, meant letting property privately became more profitable and the Private Rental Sector grew, which was followed by government measures to give tenants greater rights, which curtailed that profitability.

From the Rent and Mortgage Interest Restriction Act of 1915 which capped rents, to the Protection from Eviction Act in 1977, as well as huge social house building programmes in both post-war periods, the Private Rental Sector shrank and expanded again more than once.

We also saw the introduction of low interest mortgages in the seventies, which supported homeownership, and Right to Buy in the eighties which decimated social housing stock and boosted homeownership to well over 60%.
As a result of all of these factors, the Private Rental Sector fell to a low of just over 10% of households in the eighties.

Beginnings of buy to let

The seeds of buy to let, as we now know it, were sown with the The Housing Act in 1988 which introduced the Assured Shorthold Tenancy and removed rent caps, making it far easier for landlords to make a profit from renting property.
Cut to the nineties and the introduction of off-the-peg mortgage deals for landlords, and the buy-to-let boom began in earnest.

We all know what happened during the Global Financial Crisis, and government interventions initiated by then-Chancellor George Osborne to make investing in property less attractive continue today.

But the fundamentals supporting the Private Rental Sector are evident, in population growth, owner-occupation rates and a chronic lack of social housing.

Supply and demand

The population of the UK is an estimated 66 million, according to the Office for National Statistics (ONS), and it’s expected to continue growing, reaching almost 73 million by 2041.

But Britain’s housing market is struggling and we are still not building homes fast enough to keep up with demand. Plus, house prices – at an average of £226,234 according to the ONS – are not affordable for many aspiring homeowners.

It’s no surprise that the number of households in the Private Rental Sector rose by 25% between 2010-11 and 2017-18, to 4.5 million, according to the government’s English Private Landlord Survey making it the second largest tenure in England, and home to a fifth of all households – 35% of which are families with dependent children.

Rental demand remains high, rents are higher still, according to Your Move – up to £861 a month (up by 0.4% over the last year) – and, of course, buy-to-let mortgage rates are low.

So, while continued challenges for landlords (and there are more to come) mean we are likely to see the buy-to-let market stagnate in the near future, the long-term demand for the sector is clear.

As history has shown us, the Private Rental Sector always bounces back.

For the use of mortgage intermediaries and other professionals only
If you do not have professional experience, you should not rely on the information contained in this communication. If you are a professional and you reproduce any part of the information contained in this communication to be used with or to advise private clients, you must ensure it conforms to the Financial Conduct Authority’s advising and selling rules. Birmingham Midshires is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628. This information is correct as of May 2019 and is relevant to Birmingham Midshires products and services only.

Speaking at Mortgage Solutions’ Buy to Let Market Forum, BM Solutions head Phil Rickards (pictured) said this should be a key avenue to explore for advisers as some lenders have lots of customers still on SVR.

“We’ve seen a dramatic increase year-on-year for the last five years in product transfer business and I’m not entirely sure that every landlord realises they’ve got that as an opportunity,” he said.

“So if you’re not contacting your customers and giving them an opportunity to product transfer, for which we pay a proc fee for example, that’s a really simple business idea.

“There’s a big growth area in product transfers still to be had out there, so contacting your customers and staying in touch with them is really important,” he added.

‘Everybody will do them’

Kensington Mortgages new business director Craig McKinlay also raised the importance of product transfers with the audience in Manchester.

“Product transfers have been booming, especially in the high street, and while fewer specialists do them, I think everybody will end up having to do them at some point,” he said.

He continued: “Product transfer is still quite an immature market despite some lenders doing it for many years.”

Include advisers in retention

McKinlay urged brokers to ensure they completed a full re-advice process when doing so.

But he also noted that customers may prefer to opt for a simpler process without paperwork and potential valuations for only a small cost saving.

And McKinlay was disappointed that some lenders decided not to include advisers in the retention process.

“We’ve just done it ourselves and included the broker,” he said.

“I think lenders forget that it’s the broker that has the relationship with the borrower and they then place that customer with the lender.

“So including brokers is very important, some lenders don’t, but I think some lenders would like to do so but some technical issues remain,” he added.

Lenders also noted that they were surprised how long rates had stayed so low and suggested there may be some additional consolidation in the wider lending market.

Speaking as part of the panel debate at Mortgage Solutions’ Buy to Let Market Forum in Manchester, BM Solutions head Phil Rickards explained he felt it was unlikely many lenders would enter the space.

“I don’t think we’ll see lots of new lenders coming into the buy to let space,” he said.

“Probably four or five years ago lenders were thinking it was a fairly lucrative space to play in, but I think a few of them have found it more difficult than they may have expected to take market share.

“We’ve all talked about there being lots of lenders, but I don’t think it’s the sort of market you’ll see lots of new lenders entering in the next few years. Although I may be wrong,” he added.

‘No funding constraints’

Vida Homeloans director of sales, mortgages Louisa Sedgwick (pictured) sought to ease concerns about funding from capital markets drying up for lenders to use.

“We all talk about some lenders struggling with funding, but there are plenty of people wanting to lend money – there are no funding constraints,” she said.

“There is no shortage of funding within the buy to let and residential funding markets.”

However, Sedgwick noted that margins were becoming tighter which was reducing lender profitability.

Speaking earlier in the day, Kensington Mortgages new business director Craig McKinlay added his voice to the surprise at how the current market was playing out.

“It’s a very good time to be a borrower at the moment,” he said.

“I’m not sure how long rates can stay as low as they are, but I’ve been saying that for two years.”

The Buy to Let Market Forum continues next week in Cardiff and Reading, with registration still open.

Speaking at The Buy to Let Forum, BM Solutions head Phil Rickards (pictured) also noted that it was making a significant investment in its technology systems, but reiterated that it was highly unlikely to enter the limited company sector.

Rickards told the audience in Manchester that the policy was under active review and he hoped to have an answer soon.

He also pointed out that the lender had invested in its portfolio offering, including developing underwriters.

“For example, our underwriters on every portfolio application will now pick up the phone to you and they will have a sensible conversation about what they need to get the application through to offer,” he said.

“We’re already getting feedback that it’s been very well received and we’re also changing the way we ask for information by simplifying the customer profile form.

“And over time we’ll automate the decision process, so it’ll be similar to what you see for a traditional buy to let,” he added.

When quizzed by the audience, Rickards confirmed that there was a “massive programme of IT development” taking place to improve the lender’s IT systems.

However, he repeated the statement that the lender was unlikely to enter the limited company arena.

“All of our reason for being is about writing traditional buy to let and writing it really well,” he continued.

“And if we carry on doing that there’s a big percentage of the market we can support, and we can support you with a slick process.”

The buy-to-let market has come under increased pressure in recent years with tax and regulatory changes but there are still opportunities for the right customers.

Rickards (pictured) will explain how we got to where we are today and what the future holds for the private rental sector (PRS) and buy-to-let, and where mortgage brokers can provide the best value.

Registration open

Registration for the free-to-attend Buy to Let Market Forum 2019 roadshow is now open, with four events around the country covering the essential elements of the current market.

BDRC director Mark Long will open the first two sessions at Manchester and Birmingham while Keystone Property Finance CEO David Whittaker will take on the keynote speech in Cardiff and Reading.

Long will be utilising the latest research to examine the changes and trends in the private rental sector and try to anticipate what might be coming down the tracks in the next 12 months.

Whittaker will be giving an overview of how he sees the market developing and what this means for lenders and brokers.

The four half-day conferences, brought to you by Mortgage Solutions, are specifically tailored to keep brokers up to speed with the changing market and help maintain and improve valuable business relationships.

Dates and venues:

AJ Bell Stadium, Manchester – 24 April

Aston Villa FC, Birmingham – 25 April

Cardiff City FC, Cardiff – 1 May

Royal Berkshire Conference Centre, Reading – 2 May

For more information and to register, visit the event website.