Looking at the recent trade press headlines about the buy-to-let market, in particular how it might function after the PRA’s portfolio landlord underwriting changes are brought in, I appear to be walking a very different path to those commentators quoted.
Talk of a ‘car crash’, of ‘log jams’ and ‘market dislocations’ might seem like the most obvious, prescribed future for some stakeholders but I tend to look at the sector in a rather more positive way; certainly I’m more glass half-full than glass half-empty as I don’t see the changes as precipitating some sort of ‘end of days’ scenario in which brokers will be forced into a zombie mortgage hinterland, dragging their clients to lender after lender hoping to pick whatever lending ‘meat’ is available from the bones.
I wouldn’t go so far as to call this scare-mongering because to a degree, I think there’s undoubtedly an element of truth to these less positive messages. Certainly, there appears to be a disconnect between PRA-regulated lenders, how they will approach portfolio landlords and the communication channels that have been used to get these messages across. I also don’t believe that leaving it late in the day to announce an approach is particularly helpful, especially when we hear that many landlords are still unaware of the changes – although part of me wonders whether they might actually be defined as ‘portfolio’ anyway – and advisers will have a tricky job in explaining the new requirements and what is now expected of their clients, especially when it comes the greater paper/data requirements.
I buy all of that and have said for some time that advisers are going to be left holding a particular end of a particular stick in many cases – being required by certain lenders to carry out much more work for the same money, with clients wondering why it seems a rather different process to what they went through last time.
There are however a certain number of positives that we mustn’t overlook in all of this. The move away from ‘dinner party landlords’ – a term I really don’t like but appears to have become an industry norm – to a more professional landlord population is not a bad thing. Professionals tend to take this market much more seriously, are acutely aware of the changes, these new requirements and will be doing all they can to ensure that their business is not negatively impacted by them. For dinner-party landlords who might find themselves fitting the portfolio definition, it is likely to be a much more difficult situation and problems could occur.
The other positive is around the lenders themselves and how they might approach the post-September market. You will know by now, for instance, that Fleet Mortgages is not impacted by the changes and it would be very easy for us to say ‘it’s business as usual’ which to a large extent is true, but we actually want to ensure that the system and process for advisers is as simple as it can possibly be and that they have full information and transparency about what we can offer their portfolio landlords. To that end, we reviewed our practices in this area and simplified where possible in criteria, product offering, process and infrastructure; we also made three firm commitments to advisers to ensure no additional work, no delays for clients due to additional processing, and a focus on quicker processing times meaning no increases in costs to client.
If this market is going to be more complicated and require more work by advisers with the majority of lenders, then we certainly don’t want to be adding to this. In fact, quite the opposite, so it’s pretty much ICR’s of 5% at 125% across the board, access to underwriters, an online system that has been set-up to deal with portfolio landlord lending, and a willingness and ability to work with portfolio landlord clients regardless of where their existing portfolio loans currently are.
There will be some advisers who are looking at the headlines recently generated and contemplating their own position in this marketplace and whether sustainable business levels can be achieved, without having to work their fingers to the bone to achieve them, from October. What we would like to say is that specialist lenders like ourselves are not deviating from their path – as mentioned, since our launch three years ago we’ve always focused on the portfolio/professional landlord market and this has not, and will not, change.
Advisers should take a large degree of confidence from that because it means no wavering of commitment and no wholesale system changes which may take time to bed in, and that’s without truly knowing what others’ lending appetite will be. It will be a time to rely on those who can be relied upon and to work closely with the specialists who are there to help you. I could say, ‘I wish you luck’ but you make your own luck in this industry and utilising the right partnerships and what they can offer, is likely to make you a lot luckier from October.
Bob Young is chief executive officer of Fleet Mortgages