Alan Cleary - Managing Director of Precise Mortgages
A plethora of regulatory and tax changes over recent years has seen the buy-to-let landscape shift dramatically.
Stamp duty land tax surcharge, phased reduction of mortgage interest tax relief and stricter underwriting standards, to name just a few. The list seems endless and landlords would be forgiven for thinking they’d drawn the short straw.
But landlords are an entrepreneurial bunch. While we’ve no doubt seen a number of landlords opt to exit the market, many of the more professional outfits have risen to the challenge presented to them, choosing to spread capital more evenly to bring down portfolio LTVs and minimise mortgage costs as well as considering where to find and how to create value in today’s buy-to-let market.
They’re seeking out more profitable properties to replace those that have been or are being sold. Semi-commercial, multi-lets and HMOs have seen a big uptick in popularity over the past couple of years.
Another area that continues to see increasing activity is landlords opting to purchase sub-standard properties at a lower market value and then adding capital value by completing refurbishment works, ultimately improving yields by attracting quality tenants to help maximise the rental income possible.
There are various ways to finance this approach, but bridging finance has proved very popular with landlords looking to expand their portfolios.
We spotted this trend around a year ago and, as a result, launched our own refurbishment buy-to-let proposition.
It works by combining a short-term bridging loan that rolls up interest while the refurbishment is undertaken. When the property is ready to let and meets the expected value, the customer exits on to a standard buy-to-let term mortgage — but the beauty of it from the borrower’s perspective (and the broker’s) is that there is no need to resubmit an application for the buy-to-let loan. The whole deal is underwritten at the outset. And given that it is two separate loans, the broker has the added bonus of a double procuration fee, too.
And with clever use of other earned disposable income to supplement affordability calculations, landlords now have even more flexibility on how and where they use their capital. We’ve recently extended our top slicing offering to cover our entire buy-to-let range, including our refurbishment buy-to-let proposition.
As a specialist lender, we have long understood the value of discovering and opening up niches. Supporting landlords and helping them as they reshape their portfolios is our ethos. If your customer is a landlord looking for a new way to maximise their rental yield and increase capital value, our refurbishment buy-to-let proposition could enable them to do so.
This was always a resilient sector, and it is likely to remain as such, and I firmly believe that the outlook for the buy-to-let market looks set to remain positive throughout 2019.
Alan Cleary - Managing Director of Precise Mortgages
The new Tenant Fees Bill which came into force on 1st June is certainly something your customers need to be aware of.
The bill has been introduced to protect tenants from the unexpected costs and hidden fees that can blindside them when they take out a new tenancy. Agents and landlords are now banned from charging fees for anything other than contract changes or termination when requested by a tenant; utilities, communications services and council tax; and issues for which the tenant is at fault, such as the replacement of lost keys. The new rules also involve capping deposits at five weeks’ rent for tenancies below £50,000 a year. Those found to be in breach of the new rules will face a fine of up to £5,000 for a first offence, with further breaches resulting in a fine of up to £30,000 and subject to a banning order.
Now don’t get me wrong. Anything which protects tenants from unscrupulous landlords is to be applauded. What does concern me, however, is the sheer weight of new legislation which has been introduced recently. The Tenant Fees Bill is just the latest in a long line of changes aimed at rebalancing the relationship between tenants and landlords and delivering a fairer, better quality and more affordable rental sector.
In the last 12 months or so, we’ve seen the launch of Minimum Energy Efficiency Standards which means that newly rented houses and those with renewed tenancies have to achieve an energy performance certificate rating of E or above. We’ve also seen the licensing rules for HMOs extended to any property rented to five or more people who form more than one household, regardless of the number of storeys, and minimum room size regulations being introduced.
Combine those with the government announcing it’s planning to get rid of Section 21 ‘no fault’ evictions and the ongoing phased reduction in mortgage interest tax relief, and you couldn’t blame landlords if they’re feeling a little overwhelmed. I read recently that there are around 120 pieces of legislation that landlords must adhere to. That’s a lot of information for anyone to keep on top of.
Brokers who have got their finger on the pulse can really make a difference to landlords who need help in navigating their way through the regulatory maze. This is where Precise Mortgages can help. It’s our view that brokers are fundamental not just to their customers’ success, but also to the success of the wider market. It’s why we place such importance and invest so many resources in making sure you have access to the support you need when placing complex or unusual cases.
We’ve expanded our sales team considerably in the last two years. It means wherever you’re based, one of our friendly and knowledgeable business development managers is never far away. In 2018 alone, our team supported 272 workshops, seminars and round-table events around the country to increase brokers’ understanding of specialist lending and, in particular, changes to the buy-to-let market. In addition, our office-based sales support team is on-hand to pick up your questions, ensuring you get the answer you need as quickly as possible.
So while new rules and regulations continue to keep coming thick and fast, it’s good for you to know that there’s support there if you’ve got a question about any of the changes or need a bit of help in placing a case.
Alan Cleary - Managing Director of Precise Mortgages
Imagine you’re approached by a customer who wants to purchase a buy-to-let but is struggling to find a lender who will give them the mortgage they want.
Despite having a monthly disposable income which could comfortably cover any void periods, the rental value of the property means they can’t achieve the loan size they need.
If you were presented with this situation, would you know where to go for a solution to your customer’s problem?
Fortunately, our top slicing option means that, providing a customer has sufficient disposable income (this can include earned disposable income, surplus portfolio rental income, or a combination of the two) and the rental income on the property they are looking to purchase meets a minimum 110% interest coverage ratio at pay rate, they can use the surplus income to demonstrate they can meet any rental shortfall.
Top slicing is available across our entire buy-to-let range including to limited company and personal ownership landlords, whether they are portfolio or non-portfolio (excluding first-time buyers, first-time landlords and repayment applications).
By taking a comprehensive view of customers’ circumstances, our top slicing proposition can provide landlords with greater flexibility around how they manage their portfolio. It can also provide improved access to two-year fixed rate mortgages when compared to underwriting which relies on the rental income of the property alone.
We’ve also made applying for top slicing easier by enhancing our DIP process. Brokers will no longer have to select top slicing as an option at the start of the process. Instead, the DIP will now automatically return the loan amounts available, both when using top slicing or just using rental income, for the products available to their customer. What’s more, if their customer is only using surplus rental income from their portfolio to demonstrate the required rental cover ratio, we won’t need to see any additional proof of income.
In addition, if brokers find after submitting an application using rental income only that their customers’ circumstances change, they will be able to switch on to top slicing post-submission without the need to rekey the application as long as top slicing was available initially.
Precise Mortgages, the UK’s leading specialist lender*, has appointed a new Business Development Manager to further strengthen its support for brokers in the London South West region.
The lender has appointed Charlotte Parker to support brokers in the Guildford, Kingston upon Thames, Portsmouth, Reading, Southampton, South West London, Sutton and Twickenham postcodes.
Charlotte has 18 years of experience working as a mortgage advisor for Nationwide and, most recently, as a mortgage broker for Embrace Financial Services.
Her arrival is part of a reshuffle of Precise Mortgages’ Sales Team which will see her predecessor, Dan Watson, move into a new Bridging Specialist Distribution Manager role, enabling the lender to provide nationwide support for its Bridging proposition.
Jamie Pritchard, Head of Sales for Precise Mortgages, said: “I am delighted that Charlotte has chosen to join our Sales Team. I believe her vast experience will stand her in good stead for understanding the needs of her broker relationships, as well as educating them about the solutions that a specialist lender like Precise Mortgages can provide.”
Source: * BVA BDRC Project Mercury Report Q4 2018
Precise Mortgages, the UK’s leading specialist lender*, has made its top slicing feature available across its entire buy to let range to help more customers achieve greater flexibility around product choice and loan size.
The lender is now accepting top slicing on all eligible personal ownership, limited company, portfolio, HMO, and holiday and student let applications. First time buyers are excluded.
Customers will be able to use surplus portfolio or earned income to demonstrate that they could meet any financial stresses on their new property application, rather than through the rental income of that property alone.
This can help to unlock its range of 2 year Fixed rate buy to let mortgages, in addition to its 5 year Fixed rate products, to give customers access to a wider range of products which may previously not have been achievable.
Precise Mortgages has also streamlined the application process by reducing the number of questions brokers have to provide answers for and enhanced its online buy to let calculator.
Alan Cleary, Managing Director of Precise Mortgages, said: “In a challenging market, we’re always thinking of new ways to help more customers get the buy to let mortgage they want and optimise their investment opportunity.
“By making our top slicing feature available across our entire buy to let range it creates greater access to our 2 year Fixed rate products, therefore opening up options to more customers, particularly those who might have been restricted by ICR requirements in the past.”
*Source: BVA BDRC Project Mercury Report Q4 2018