The buy to let horizon
Without a doubt, the regulator’s last intervention with the buy to let market will have devastating effects for some; for others, however, it can and should be seen as an opportunity.
For far too long, many brokers have pigeonholed themselves into specific areas of the marketplace, many claiming to specialise in residential or buy to let, with others claiming commercial or bridging.
The ever-growing expectation on the broker, combined with the tightening of product regulation is highlighting the need for brokers to spread their wings and enter other product areas, that previously they had not dared to enter. Perhaps this is due to fear, lack of knowledge, laziness or just that they are happy with their lot in their current environment.
The market is continuing to evolve and as the latest changes in the buy to let arena start to take effect it is clear the divide between residential, buy to let and commercial is starting to close, meaning there has never been a better time for brokers to place a little more emphasis on other areas of business.
At the time of writing this article, lenders have only just started to divulge their criteria for the professional landlord, which will now be classed as landlords with four or more properties. However, it is already quite clear that a commercial underwriting approach will be adopted. The need to understand accounts, cash flow, assets and liabilities will be crucial.
Whether you write the business directly or defer to a specialist, the need to evolve and to consider the full range of financial mortgage and loan products available is unquestionable.
First, we saw the introduction of consumer buy to let; bringing elements of buy to let mortgages into the regulated space. Then we had the taxation issues on the buy to let marketplace affecting the small ‘amateur’ landlord. Now we see elements moving into the realms of the commercial arena. The leftover pickings will not be sufficient to support those brokers out there that only concentrate on residential and standard buy to let.
We have already seen a reduction in buy to let business with many firms indicating a buy to let/ residential split of just 20%/ 80%. Where before, buy to let comfortably accounted for as much as 45% of a firm’s business split.
The options are clear, firms need to accept these changes and use the many skilled people around them to assist in ensuring they maintain their market share. Attending workshops to keep up with these fast-paced changes, often the bane of many a broker, is one way to learn and keep abreast of the changes.
Many packagers or ‘Specialist Distributors’, now are adept at dealing with all aspects of the property marketplace and will be only too willing to assist not only in placing your trickier cases but also to educate.
Utilising Ingard’s internal Specialist Distribution team is something some brokers are wary of but it is a great way to learn and understand lender requirements. We have put a great deal of time and effort into employing a talented team to support all of your business. This enables you to refer business which you don’t have the time or knowledge to service, or send it to us to package so that you can access higher commission splits and in some cases exclusive products.
By David Ewing, Managing Director