Jeff Knight is director of marketing at Foundation Home Loans
I recently put together a presentation for one of our distribution partners and an adviser-based audience.
This provided a great opportunity to talk up a buy-to-let market which has been talked down so often over the course of the past 12 months.
Don’t get me wrong here, there remain many challenges to overcome and confidence is relatively low, but the market is still working and there are plenty of opportunities emerging for intermediaries within this sector.
Landlord confidence may be subdued but intermediary business expectations are strong, and confidence is trending upwards.
According to the Q3 BVA BDRC Project Mercury report, confidence in the intermediary channel rose from a value of 0.84% in Q2 2019 to 0.90%.
Intermediary confidence within their own firm also edged up from 0.92% to 0.93%. When directly posed the question why such levels were on the rise, we received the following intermediary responses:
Although there remains a significant amount of business which proactive intermediary firms could, and should, be tapping into as a considerable amount of lending is still being placed directly with lenders.
Additional Q3 research conducted by Foundation Home Loans in conjunction with BVA BDRC revealed that 73% of landlords carried out their most recent mortgage via an adviser, however 19% went direct to a lender and 1% went via a comparison site. While 31% of landlords said they plan to remortgage at least one of their properties over the next 12 months, 65% of those said they expect to use an adviser, 23% would go direct to a lender, 3% would fund it by other means, and 10% were unsure.
In the increasingly multifaceted and competitive world of buy-to-let mortgage lending, it seems somewhat surprising to hear that nearly 20% of landlords went direct to a lender for their latest mortgage, and that 23% plan to go direct when they next remortgage.
However comfortable some landlords are with the market – and there are many portfolio landlords who feel very able to sort their own finances out – there is always the potential for them to miss out on a more flexible deal, a larger loan capacity, competitive rates and favourable criteria.
Intermediary firms and distributors have an important role to play in this process. As a specialist lender who is looking to increase its presence not only within BTL but also across the residential marketplace, we are always looking to align ourselves with partners who share our vision and breadth of offering. And this has to be the right fit for both parties.
An increasing number of advisers are likely to see borrowers with specialist needs, from those with minor credit blips to professional landlords seeking a limited company product solution.
These cases may seem to be far removed but they illustrate the breadth of advice required from borrowers who are simply reacting to shifting demographic and financial trends. The residential sector is becoming increasingly complex which, as highlighted in one of the comments earlier, represents great news for intermediaries. There are growing numbers of self-employed people who need additional support in servicing their mortgage requirements. We are seeing record numbers of CCJs being issued.
More people are having portfolio careers, often creating a mix of employment, freelancing, and/or consultancy work – therefore generating multiple streams of income.
People are working beyond traditional retirement ages, and a rising quantity of credit-worthy borrowers who are falling short when it comes to the strict tick-box mentality of many high-street residential lenders.
The specialist markets will continue to escalate in importance for landlords and residential clients in 2020. We anticipate that our range of residential products for those who are just missing out on mainstream deals, plus our specialist landlord offerings, will be the biggest hits with our intermediary partners in the year ahead.
Despite the lingering challenges facing the economy and, to a certain extent, borrowers, it’s far from doom and gloom when it comes to the opportunities emerging within intermediary market.