The PRA’s changes to tighten up lending criteria and ensure consistency have sent tremors across the lending landscape. Borrowers with four or more mortgaged buy to let properties are now classified as ‘portfolio landlords’ and subject to more stringent underwriting standards.
In its Supervisory Statement released at the time it announced the changes, the PRA said: ‘The PRA expects firms to recognise that existing experience and skills acquired in buy to let lending do not automatically translate into equivalent skills when assessing portfolio landlords. Lending to portfolio landlords is inherently more complex given the quantum of debt in aggregate, the cash flows and costs arising from multiple tenancies, and potential risks of property and/or geographical concentrations.’
As well as having to provide more in-depth information for new applications, brokers and landlords now also have to submit details for all the other properties in their portfolio. It’s caused an increase in the volume of work for both parties and, as a result, all lenders have had to radically rethink the way in which they’ll lend to portfolio landlords in the future.
We’ve seen lenders adopt a wide range of different approaches. Some lenders appear to have given very little thought to the impact on brokers’ sales processes and fee earning ability – they’ve pushed the burden onto the brokers by asking them to key in the portfolio details into their systems, meaning more work for the brokers for the same amount of money. Other lenders have announced they won’t be lending to portfolio landlords at all.
Imagine you’re a broker submitting a £100,000 buy to let application. Before the new regulations were introduced, you’d have earned a proc fee of around £400 for doing this. Now imagine your customer is applying for a new buy to let mortgage and already has 10 other properties in their portfolio. Following the introduction of the new regulations, not only do you now have to key in the details for the new application, you also have to supply data for the other properties too, all for the same £400 proc fee. You can see where the problem is and why some brokers might be reluctant to help portfolio landlords in the future.
It all means the market is now much more complex, with the expectation that specialist lenders will cope better with the changes than the larger ‘vanilla’ high street lenders. Certainly, as portfolio lending becomes more specialised, brokers and landlords will be less likely to go to lenders who aren’t providing them with the support they need.
Here at Precise Mortgages we thought long and hard about how we could minimise the disruption to brokers and landlords, while meeting the new requirements at the same time. We’ve set up a dedicated Portfolio Team who do the ‘heavy lifting’ for brokers by keying in the additional information – business plans, assets and liabilities statements, and details of existing residential property portfolios – required by the new regulations. Brokers can submit the information on our forms, landlords’ documents or any other format.
Although the long-term effects of lending to portfolio landlords are likely to be significant, there will be opportunities for specialist lenders and brokers who are prepared to adapt and evolve to the changing market. By making things as simple as possible and minimising the impact of the change, these lenders can help brokers and their customers concentrate on doing what they do best – growing their buy to let businesses.
Precise Mortgages, the specialist lender, has appointed a new Business Development Manager to ensure brokers in the South Yorkshire, East Midlands and South Midlands regions get the support they need.
Danielle Batchelor will look after intermediaries in the Derby, Doncaster, Huddersfield, Leeds, Lincoln, Milton Keynes, Nottingham, Northampton, Sheffield and Wakefield postcodes.
Danielle joins Precise Mortgages from Aldermore where she was responsible for looking after brokers in a similar patch to her new role with Precise Mortgages. She also gained valuable experience with the Coventry Building Society where she worked as a mortgage advisor before moving into the telephony Business Development Team.
Danielle is the latest addition to Precise Mortgages’ Sales Team. In the past year the lender has appointed Business Development Managers in the North West, North East, West Midlands, East Anglia and South East regions to help and assist brokers in these regions.
Danielle said: “I’m delighted to be joining Precise Mortgages at what is a really exciting time for the company. It’s a patch I’m already familiar with, so I’m looking forward to getting out and helping brokers access our fantastic and broad range of solutions for the specialist market.”
Jamie Pritchard, Head of Sales for Precise Mortgages, said: “Danielle’s energy and commitment will fit in superbly with the rest of the team.”
James Briggs, National Sales Manager, Second Charge Loans
Second Charge Loans aren’t just for customers with adverse credit. Whilst they are used by customers with less than perfect credit profiles, most of them are used by prime borrowers who need to raise funds quickly, want to protect an existing first charge rate or want to avoid the early repayment charges that a remortgage could incur.
Although they’re recognised within the industry, they’re not so well known by the general public. Brokers can raise awareness by bringing them to the attention of customers who are looking to raise capital. Customers will probably describe a scenario and this is where a knowledgeable broker comes into their own, identifying opportunities when a Second Charge Loan could be the solution for their customer’s needs.
If your customer decides a Second Charge Loan is the right product for them, we’ve made it as easy as possible to apply for one with us. You have two choices of how to submit your applications – either directly through our in-house specialist team or through our approval panel of Master Brokers.
By coming to us directly, you’ll benefit from the support of one of our experienced underwriters who will help you from start to finish. You’ll still be in control of the arrangement fees and you’ll be able to apply your normal fee structure. Furthermore, you’ll receive a 1.25% proc fee.
If you choose to use one of our approved panel of Master Brokers, they will use their experience and specialist knowledge to arrange your applications. To view the panel, click here.
To introduce a case directly, speak with our underwriters by calling 0333 240 6054. To discuss a case you’d like to introduce via a Master Broker, call 0800 116 4385.
Precise Mortgages, the specialist lender, is helping brokers prepare for the Prudential Regulation Authority’s (PRA) upcoming portfolio landlord changes by launching its portfolio proposition online.
The lender has published new documents and the process brokers will need to comply with after the PRA’s changes come into effect on 30th September.
Once the changes are implemented, Precise Mortgages will require brokers to submit a business plan, an assets and liabilities statement, and details of their customer’s residential property portfolio.
Brokers will not need to key the additional information into the system. The heavy lifting will instead be done by a dedicated portfolio team Precise Mortgages has set up to ensure brokers are affected as little as possible by the changes.
Managing Director Alan Cleary said: “We’re giving brokers a head start by making our forms accessible more than a week before the PRA’s new underwriting standards for portfolio landlords come into force.
“It means brokers can start collecting their customer’s information in advance and be ready in plenty of time. Once the portfolio team has input the information into the system, it will remain valid for six months making future applications even more straightforward.”
Precise Mortgages’ portfolio landlords criteria highlights include:
Precise Mortgages, the specialist lender has announced its approach to Portfolio Landlords ahead of the implementation of phase two of the PRA’s underwriting standards due on the 30th September.
Central to the lender’s proposition is the creation of a Portfolio Team whose role is to do the heavy lifting for mortgage intermediaries and to help with the additional information required by the new regulations. The additional information required will be a Business Plan, Assets and Liability Statement and details of the existing residential property portfolio.
Highlights of the proposition are:
The lender’s criteria is largely unchanged with the exception that the existing residential portfolio may be subject to interest rate stressing depending on the assets and liabilities of the landlord. Typically the interest rate stress will reflect the new business market in terms of customer type and ICR calculations.
Criteria Highlights Unchanged:
The new forms referenced above will be available on the lender’s website week commencing 25th September.
Managing Director Alan Cleary said: “We thought long and hard about how we could minimise the disruption to the mortgage intermediary and to the landlord whilst meeting the new requirements and have invested a significant amount of money and resources to make sure that we take as much of the burden as possible.”