Industry Interview: Together
1) How does a specialist lender differ from a High Street Bank?
Specialist lenders can often offer more flexibility than the mainstream. For example, a self-employed director of a limited company wanting to raise finance by securing a loan against an unusual property may be turned down by a High Street Bank because they often use ‘tick box’ criteria. Lenders such as Together’s underwriters use a common sense approach to look into all aspects of the case, such as the customer’s employment status and the property they’re looking to buy, with a view to providing the finance needed.
2) How would you summarise the state of the buy to let lending market at present?
It’s been a tough few years for buy to let because of successive cuts to mortgage interest relief and regulatory changes. However, research carried out for Together shows the average yield for buy to let property was 5.8% in the first quarter of the year. We are seeing a ‘professional’ era for landlords, with some restructuring their portfolios to mitigate the impact of the changes.
3) What is the outlook for buy to let landlords?
I think the market will remain buoyant, despite the challenges. Research shows that 52% of landlords are expecting good or very good rental yields over the next three months and there is even greater confidence in regions such as the East of England and the West Midlands. This may lead to landlords selling their properties in prime areas of London and moving to the regions where they could achieve higher yields.
4) How has PRA regulation impacted your lending business?
The regulation has introduced some fairly stringent guidelines for lenders around affordability and stress testing, making the application process trickier. This has seen some mainstream lenders leave the buy to let market. However, this situation will provide more opportunities for specialist lenders who have the knowledge and skills to deal with more complex, portfolio landlord business.
5) Where do you see the mortgage market going in the next five years?
I predict a move towards more specialist lending as more and more people’s circumstances change. For example, we have seen a rise in recent years of the ‘gig economy’, made up of self-employed workers, who may struggle to access finance to expand their property portfolios through high street banks. Bridging loans have become a more popular choice for borrowers as rates have fallen in recent years and I expect this to continue. The second charge market should also increase as more borrowers see them as a viable option.
Top three tips for borrowers
1: Do your maths. Make sure that the sums add up and that you can afford the repayments on your loan. Particularly in the buy to let sector, borrowers need to be able to adapt to the changes and to ensure they’re getting financial advice on their own tax position and the impact the changes will have.
2: Research the market. Look at up and coming locations. Good schools, hospitals and transport links can all add to the value of a property.
3: Don’t give up. Borrowers who’ve been turned down by High Street Banks need to know that finance may be available through specialist lenders, who will consider finance on properties in need of renovation, for those with complex incomes or a less-than-perfect credit rating, to give a few examples.
Chris Baguley, commercial director at Together