Specialist lenders

Specialist lenders 'ideally placed' to help BTL remortgage customers

Specialist lenders are ideally positioned to offer tailored and flexible finance solutions to support buy-to-let (BTL) customers looking to remortgage, an industry expert has claimed.

Recent research carried out by Precise Mortgages found that 55% of brokers expected to face some issues placing BTL mortgage cases.

Meanwhile, one in four BTL brokers also said they were facing significant issues as the second anniversary of the rush to beat the introduction of the 3% stamp duty land tax surcharge approached.

Why are BTL brokers facing remortgaging issues?

According to data from the Council of Mortgage Lenders, £4.3bn of lending was complete in March 2016 during the run up to the changes, with 28,700 BTL mortgages being advanced.

Customers who bought with two-year fixed rates are now wanting to remortgage.

“The criteria for people buying a buy-to-let property two years ago is very different to now,” said Liz Syms, CEO at Connect for Intermediaries.

“This means that many of the people who flocked to buy one or more of the 28,700 rental properties may now be finding that it is not quite so easy to remortgage on to a cheaper deal.”

Jonathan Sealey, CEO at Hope Capital, added: “The issue is that so many thousands of people took out a buy-to-let mortgage just before the introduction of additional stamp duty when the rules were a lot less strict than they are now and there was no PRA stress testing. 

“Many of those people took out two-year rates so are now looking to remortgage only to find that it is much harder to do so.”

Paresh Raja, CEO at Market Financial Solutions, felt that tax implications and lending restrictions had become more complex and could be quite daunting for the uninitiated.

“The advanced ‘stress rates’ for stricter affordability checks mean that brokers now have to look further afield to find the right deal.

“Many banks have completely changed their lending criteria with the imposition of stringent new measures, which creates an added degree of complexity for brokers.”

Can specialist lenders help?

Since the start of 2018, a number of specialist lenders have introduced new BTL ranges to help those looking to refinance.

The likes of Accord and Together have refreshed their BTL products, while new entrants, such as LendInvest, are looking to support those struggling to obtain a BTL mortgage from a mainstream lender.

“Specialist lenders are ideally placed to help these customers in this new climate,” said Alan Cleary, managing director of Precise Mortgages.

“For example, Precise Mortgages’ top slicing option allows customers to secure the buy-to-let loan size they need by using their excess disposable income to top up any rental shortfall.”

Paresh added: “With the market now facing more stringent lending criteria from mainstream lenders, specialist lenders are ideally positioned to offer tailored and flexible finance solutions.

“Specialist finance lenders do not typically work like high street banks – they have much more flexibility and scope to find products that suit the specific needs of a borrower.

“By delivering a more tailored approach free of unnecessary paperwork, a specialist lender can constructively work alongside its client to find the ideal solution for their circumstances.”

Mark Sismey-Durrant, CEO at Hampshire Trust Bank, said it was seeing more remortgages coming through from its brokers and had prepared for this.

“Specialist lenders have a vital role to play in providing introducers with access to finance.

“This is because banks like Hampshire Trust Bank write deals on a case-by-case basis, whereas the high street banks don’t tend to.”

Jon Salisbury, managing director at Ortus Secured Finance, added: “Specialist lenders can help borrowers who are struggling to refinance, but it is important their loan does not defer an inevitable problem or make a situation worse.” 

What do brokers want to see?

“What we need is [a] sensible lender approach in the regulated space as, all we are talking about, remains simply, a mortgage,” said Vic Jannels, chairman of All Types of Mortgages.

“If the value, client status, rental income and re-saleability make sense and the property is not to be lived in by a family member, then what is the real difference.

“It makes little or no sense to me.”

Nick Morrey, product technical manager at John Charcol, said it would like to see more lenders offer pound-for-pound remortgages without a rental calculation as is allowed by the rules.

“This sounds extreme, but if the mortgage has never been in arrears and the rent covers it (maybe by the 125% at 5% old-style rule) then it should be allowed to proceed.  

“Also, it should be remembered that some lenders use ‘top slicing’ to supplement their own ICR, which effectively devalues the standard ICR in the first place – so why stick to it?”

Jeff List, head of BTL at Brightstar, added: “The broker community will clearly benefit from lenders having a level of flexibility when assessing borrowing based on rent and income received and, for those that intend to keep the asset for some time, products that calculate rental based on the payrate of the product.”

James Byrne, director of mortgages at Positive Lending, highlighted some remortgage products which would help investors.

“Some specialist BTL lenders will apply top slicing, which allows for the clients’ personal income to be considered towards affordability calculations.

“This is helpful where there is a shortfall to fit the lender’s stress test based purely on the rental income.

“Products that will only stress test the property being offered as security, and do not take into account other buy-to-lets the client owns, will assist the affordability calculations.”

However, Chris Whitney, senior broker at Enness Commercial, added: “Brokers want to see cases being properly underwritten, with clients’ circumstances understood and properly assessed, not just a tick-box exercise with inexperienced credit people making wrong decisions and hiding behind ‘policy’.

“Sadly, we are seeing the market take a ‘one-size-fits-all approach’, which rarely works.

“That wish could well be overly optimistic.

“If so, it would be nice to see if some of the specialist lenders could provide investment loans at rates a little closer to the high street, buy-to-let rates.

“Several lenders have started to do this, but the gap is currently still too wide for the specialist market to make the high street redundant, but I think this year we will see that gap close.”

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