First published on Financial Reporter 10 June
Cast your minds back a decade or so ago, and in that immediate period post-Credit Crunch, there was no end of commentary and supposition inferring the buy-to-let market was as good as dead.
With funding for residential mortgages at a premium, how far down the pecking order might buy-to-let be? The lending market for landlords looked like it had dried up completely, and there were plenty of stakeholders nursing burnt fingers after over-extending themselves and thinking the unthinkable might never happen. It did, and then some.
But looking back now, and considering the health of the buy-to-let and private rental sectors today, how wrong have those forecasts proven to be? I’m struggling to think of a period since then when the buy-to-let adviser and landlord client was better catered for.
Competition is considerable, and I’m sure for most firms – as with the vast majority of Stonebridge ARs – buy-to-let is an important, and core part of the proposition.
Our lending completions for the last year show that BTL accounted for a significant part of our originations and that being the case, a thriving sector and strong landlord demand – fuelled by excellent tenant demand – is clearly going to be of benefit to everyone.
The recent re-entry of CHL Mortgages back into the market – after over 10 years away from new lending – also signalled not just how far the sector has come, but perhaps will give plenty of food for thought for all those lenders who are active (or intending to be active) in this space.
It might even beg the question, is the market unduly congested already? Many say you can never have too much competition but it’s clear from the regular pricing and criteria changes that lenders are having to react quickly and are having to become more flexible to win their desired market share.
Of course, it is difficult for many lenders to compete on price alone. I’m particularly mindful of the small and regional building societies because this is a challenging sector for them. The niches, which many of them established, are no longer their sole preserve – if they ever were – and they are often unable or unwilling to match competitors who can call upon wholesale funds or rely on larger balance sheets to sharpen their pencil.
I’m sure this is something the management teams at lenders such as CHL have had to contend with as they grapple with proposition and pricing. How do you compete in an over-supplied market, especially if it’s not on price?
Clearly, one significant area where product providers can differentiate from competitors is in terms of service efficiency and quality. Many of the specialist buy-to-let lenders are leading the way in this regard, with very quick turnarounds for document assessments or DIP reviews, for issuance of offers, and completion timetables.
Others are going even further in terms of deploying technology and harnessing publicly available data to greatly speed up their proposition. Some new entrants even aim to deliver instant offers, using Open Banking data and pre-populating applications to speed up the process like never before.
In recommending new, or indeed, any buy-to-let lender, advisers can certainly make the case to clients about securing a much faster route through the purchase or remortgage process. Some clients will naturally be prepared to pay a small price premium to complete within a faster timescale, especially during the current period, when mortgage volumes are high and where the average completion is taking over 22 weeks.
One thing we can say about the current situation in the buy-to-let sector is that it benefits landlord borrowers significantly. Lenders are not able to stand still here, and they need to continue to be both reactive and proactive in the way they approach their product propositions.
It could be a case of ‘you snooze, you lose’, and given the sheer variety and number of products and solutions out there, I suspect advisers can push at an open door in terms of targeting landlords with excellent deals.
The death of buy-to-let was greatly exaggerated.
Rob Clifford is Chief Executive of Stonebridge