Buy-to-let market

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Opportunity knocks in specialist buy to let

Charles McDowell Commercial Director, Mortgages @CharlesRAMcD

Agenda •

Specialist buy-to-let market overview

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Challenges

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Good news

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But why is it so complex?

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Broker opportunity

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Questions

Buy-to-let market Net investments down 80% Driven by less people getting into Buy to let as a pension strategy.

Some predict mortgage market to hit £38bn Still a buoyant market, driven by specialist buy-to-let and portfolio landlords.

Sentiment remains strong Two fifths of landlords thought the size of the market will increase over the next 12 months. (Down from over half this time last year) Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

How are landlords set up

55% of landlords still set up as a sole trader

10% set up as limited company

Majority of landlords have 2 – 5 properties Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Challenges

Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Challenges

“Bad experience with previous tenant”

“Brexit, increasing interest rates, other landlords exiting, political uncertainty, fewer tradesman”

“Concern about govt change and Mr Corbyn's views”

“THE GOVERNMENT”

“I can't be bothered with the aggro”

“Higher tax rates”

Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Good news Over 40% of portfolio landlords expected to increase the size of their portfolio:

o 64% are planning on buying houses o 55% are planning on buying flats o 39% are planning on buying commercial property

Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Good news Its not all doom and gloom

34% of landlords are looking for a new BTL mortgage

25% will be looking to remortgage existing property and capital raise

Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Why is it so complex? Landlords with 11 or more properties consider themselves professional

They have the largest BTL borrowing: o 23% between £500,000 and £999,999 o 29% between £1,000,000 and £1,999,999

2 in every 5 landlords are planning on buying their next buy-to-let property through a limited company structure

Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Why is it so complex? • Need for top slicing • Over 50% of landlords have complex employment status

Retired Self-employed (Landlord)

Full time employee Self-employed (other) Part time employee Other

0

5

10

15

20

25

30

35

Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

What’s the opportunity? Increased competition Steady shift to complex/specialist buy-to-let Move away from sole trader status

Change in portfolio make up and property type Market factors such as interest rate rises Sources: Intermediary Mortgage Lenders Association (IMLA) 2018 | Council of Mortgage Lenders (CML) market forecast | Aldermore and Opinion research 2018 and 2017 | Aldermore and YouGov research 2016 | BDRC landlords panel Q4 2017

Any questions?

Intermediaries.aldermore.co.uk