Despite the many challenges landlords face, the truth is that the rental market remains in pretty good shape
Take the most recent report on the sector from the trade body Propertymark. It found that the typical letting agent now has 95 interested tenants registered per branch, a significant jump from the 78 registered per branch back in January.
What’s more, rents are also steadily climbing. The most recent data from Rightmove showed that in the first quarter of the year, the average rent hit £1,088. That’s an increase of a whopping 10.8% over the past year.
The fundamentals that attract so many property investors to the market are still there. The shortage of property and underlying demand means that buying in the right location not only means healthy levels of demand from would-be tenants, but the potential for significant capital gains to boot.
No wonder that, despite the sticky economic situation, we still see a notable number of investors looking to add to their portfolios.
Computer says no
When it comes to buy-to-let, no two cases are ever the same. There will be times when there is something particularly complex about a borrower or the property they are looking to purchase, which can make the job of the broker somewhat challenging.
However, it’s not just on obviously complex cases where brokers can experience difficulties in finding a suitable lender. When it comes to the high street lenders, there is often something of a tickbox approach employed, in order to ascertain whether a case is suitable.
And that means that anything a little out of the ordinary will draw a red flag and leave the lender unwilling to consider the case. This can be particularly perplexing for broker and borrower alike, when everything about the case appears to be perfectly reasonable.
These apparent drawbacks with a case may be related to the borrower themselves; perhaps they are looking to purchase a new investment property through a limited company or are an expat. Similarly foreign nationals can find that mainstream lenders are wary over considering their application.
In other instances it will be the property that the client is hoping to borrow against which causes the high street lenders to get cold feet.
It could be that your client has seen the impressive performance of the holiday let market and wants to diversify their portfolio to include properties of this kind, or perhaps serviced accommodation. Some lenders are not comfortable lending against this sort of setup, nor against HMOs, semi-commercial or even properties which already have sitting tenants.
A more personal approach
It’s understandable why some would want to employ an automated, credit-scored decision process. Once you have that system in place you can just sit back and let the algorithms decide which cases you will handle and which you won’t.
Ultimately though, such a rigid approach does inevitably mean that some excellent borrowing prospects fall through the cracks. These clients have great ideas, have identified excellent properties that could serve a whole host of tenants and deliver great returns to boot.
And yet because there is something ever so slightly out of the norm about them or the property, the case won’t be approved by the lender.
At Hampshire Trust Bank we are committed to working differently. We have built a team of high-quality, experienced underwriters, and we put our trust in them to really get down to the nuts and bolts of a case.
No application is turned down simply because of one specialist element – instead we focus on truly understanding the borrower and the property, delving into what the client has planned and whether we can help.
It’s only by operating in this way that you can get a proper insight into an application, and it means we are far better positioned to approve applications than those relying on an automated decision process.
We know that brokers value consistency, above almost anything else. By employing a more details-led approach, we can be consistent in the way that we appraise cases and ensure that even if there is a slightly specialist element to a case that will not be enough to knock an application off course.
Louisa Sedgwick is managing director for specialist mortgages at Hampshire Trust Bank