So we asked this week’s Marketwatch panel if buy-to-let is now a specialist market and what this means for the future of brokers?
Brian Murphy, head of lending at Mortgage Advice Bureau, believes buy-to-let has followed new build and advisers need specific knowledge to help their customers achieve the best possible outcome.
Phil Rickards, head of BM Solutions, says the changing buy-to-let market has become more specialist but created opportunities for advisers as a result.
Liz Syms, chief executive of Connect for Intermediaries, argues that there is no longer a place for ‘generic’ mortgage brokers.
Although it is still possible to secure a very competitively priced buy-to-let mortgage, the sector has undergone significant changes including the tax treatment applied to landlords, revisions to stamp duty, Prudential Regulation Authority lending regulations and the definition of portfolio buy-to-let.
All of which have made the application process far more complex than it was previously for landlords, resulting – we believe – in the requirement for a more specialist approach when assisting investors.
As a sector we already apply a different approach to areas such as new build, self-build, shared ownership and large loans.
This specialism is key to generating the best possible outcomes for our customers, therefore, it’s a logical progression for buy-to-let to now follow suit.
It’s important that we have the right resources in place, with advisers equipped with the specific knowledge and experience necessary to help their customers achieve the best possible outcome in the buy-to-let market.
Currently, depending on the number of properties a landlord may have, our advisers may, in some cases, need to refer to a specialist partner.
However, as announced last week, we are currently profiling our advisers to establish which of those within the distribution have the necessary skill set and experience in this area with a view to licencing them as specialist buy-to-let advisers.
The wave of changes brought in to the industry in the past couple of years have created new layers of complexity within the buy-to-let market, and a sense among some brokers that it’s becoming increasingly more specialist as a result.
Despite this, our most recent research tells us that many landlords are still looking to acquire property, although the remortgage market is expected to be the greatest hub of activity in 2018.
Lenders have reacted to these changes with a variety of solutions designed to give brokers and customers greater choice, yet it can also feel like a more challenging road to navigate.
The limited company buy-to-let space is growing, despite being one of the more complex areas to advise on, and specialist tax advice is key to help people make sure it’s a suitable option for them.
There’s potential for specialist mortgage advisers and lenders in this area.
The more traditional buy-to-let market reliant on rental coverage ratios to assess borrowing still represents the majority of the playing field, but with more options available in this new landscape, advisers may need more time to get to grips with the best options for their clients.
There’s no doubt that the market has evolved into one way more complex than before which presents challenges to advisers and investors alike.
But this has created new opportunities at the same time for intermediaries whose roles will become even more valuable than ever to clients as a result.
When I started as an IFA I advised on a wide range of products – pensions, investments, mortgages.
But it soon because apparent that it was impossible to be a specialist in everything.
So I went down the mortgage route. And now, I think the same thing is happening with mortgages.
There are so many lenders with such a huge range of products that the market is breaking down into subsections.
Lenders are fighting for their share and business and they basically have two choices – compete on rates, which is where the high street lenders are coming into play – or compete on criteria.
And while this shift may have made the market more complex, it has also made it very buoyant.
Lenders are increasingly realising they need to find a niche area to play in to get the volume, for example, portfolios for expats.
This is great for borrowers because there is such a huge difference in lenders’ criteria that just because one lender won’t lend, doesn’t mean there isn’t a deal out there.
But the result is that brokers need to specialise too.
I don’t think you can still be a ‘generic mortgage adviser’.
The buy-to-let sector is becoming increasingly specialist so to be able to advise on the market, brokers need to understand all the latest legislation, know about portfolios, HMOs, limited companies etc, but so is the residential market – brokers also need to know about right-to-buy, new builds, and help-to-buy etc.
The diversity and knowledge brokers now need means specialising is a necessity, and I think we will see more and more brokers focusing on becoming experts on particular sections of the mortgage market.