I expect a large number of advisers are thinking that new buy-to-let lenders are the equivalent of the Number 29 bus at the moment – wait five years for new or re-entrants to appear, only to find that within a few short months there’s a growing number queuing to ‘pick you up’. Clearly the market could probably have done with this extra competition during the last half decade however, on the positive side, it’s obviously a sign of market strength that new lenders are active and that there is the appetite to fund such enterprises.
I read a comment recently about the growing number of new buy-to-let lenders and what it would mean for the marketplace, for advisers and (in particular) for clients. It seemed a very pertinent point to make and was essentially the view that new lenders were okay but if they were just going to be ‘me too’ versions of what already existed then they were hardly going to set the market alight or be able to carve out a sizeable niche for themselves. After all, we have a large number of ‘mainstream’ operators all offering relatively competitive pricing and if the new lenders are simply going to mirror their product ranges with similar rates and similar levels of service then the feeling was that advisers would generally stick with those experienced operators.
When we were talking about establishing Fleet Mortgages this ‘me too trap’ was certainly one we didn’t want to fall into. There is no God-given right to anyone’s business simply because you are new; yes, you can generate a buzz around a launch however if you’ve got nothing new to deliver or if you’re not prepared to look at different areas or up the service ante, then why should advisers use you.
Therefore, for us it quickly became a goal for us to become distinct from the competition through a variety of means – those being pricing, criteria, product areas, not forgetting service, technology and communication. We also wanted to stress our experience in this market by showing how specialist we are – so while we will of course conduct, what you might call, ‘vanilla’ buy-to-let business we wanted to be the home of the experienced landlord and property investor. Our view was, and is, that resi-based amateur landlords are already well-catered for – and we add to this mix – however (perhaps surprisingly) the professionals are not always in the same boat, indeed some lenders appear to go out of their way to dissuade such borrowers. We would not be that type of lender.
This focus on the professional naturally leads us into a number of more niche product areas – limited company, HMO, for example – but it also means our criteria has to be much more flexible than other lenders in this area. So, for our professional borrowers we are not concerned how much finance they have with other lenders, in fact we see it as a positive that someone has a performing portfolio. We’ll also let our borrowers build a decent portfolio with us over time, starting at £750,000 to £2m over six months with the intention to keep going as our knowledge of that borrower increases. For us, we credit-score both the deal and the individual so perhaps a weaker credit score could be offset against the property LTV, rental yield, a strong valuation, etc.
A specialist should also be able to work within a variety of property types and offer finance on these, not just a two-up, two-down residential home. This is why we’ll lend on good-quality ex-local authority properties (which tend to offer great yields), it’s why we’ll lend on homes split into flats up to 10 units, it’s why we will lend on student lets, multi-lets, local authority and housing association leases, and corporate lets. We know that the professional landlords and investors are more inclined to be operating in these areas and therefore it’s important for us to lend here, because the likelihood is that your ‘mainstream buy-to-let lender’ will not have such a mandate.
Finally, it’s absolutely vital that the adviser doesn’t have a ‘me too’ service experience with a new lender. Especially a bad service experience where criteria is unclear, cases are rejected with no reason given, or positive decisions suddenly require further documentation and turn into negatives, or the adviser (and client) is waiting an age to find out one way all the other. Tying this in with technology was vital for us – it means that if your DIP is approved, then there are no additional checks – doing this work up front provides certainty that the deal is going to offer. And we all know that in this market, certainty is crucial.
So while I appreciate a certain hesitancy and a cynicism about new lenders coming to market, my own opinion – and yes I would say this – is that not all new lenders are the same. I totally agree that being the same is not good enough – we have no inclination to be like every other provider in this sector. If we did, we’d have a very low opinion of ourselves as lenders and what advisers and their clients are looking for – we don’t and we are therefore working to deliver a focused, specialist proposition that is definitely more ‘we are’ than ‘me too’.
Bob Young is chief executive officer of Fleet Mortgages