Buy to let

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Buy to Let: the only constant is change and yet more change The Buy to Let Market Forum

David Whittaker CEO Keystone Property Finance

Buy to let lending: past, present & future £Bn 50 45 40

£44.6 £40.6

35

£37.5

£35.8 £32.3

30

£32 £26

25

£28 £20

£27.2

£27.4

20

£20.7

15 £14.2

10 £8.5

5

£16.4

£10.4

£3.5

0 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

£6

£8

2018

2019

Source: CML/UK Finance | MFB/Keystone predictions | MFB/Keystone Ltd Co lending predictions

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Changing behaviours - Ltd Co activity Ltd Co Lenders (16 out of 36) •

•

Lenders offering products to Ltd Co borrowers Lenders with no Ltd Co products

Ltd Co Borrowing (All completions) •

Ltd Co Products (284 out of 1,204) •

Products available to Ltd Co borrowers

•

Products available to individuals

Ltd Co Borrowing (Purchase completions)

Ltd Co BTL all completions

• Ltd Co BTL • Individual BTL

•

Individual BTL all completions

Source: Ltd Co Buy to Let Index Q4 2017, Mortgages for Business

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Changing behaviours – landlord portfolios Q4 2017

Keystone

•

Brokers handling portfolio applications

•

Portfolio reviews that have led to decline

•

Brokers not handling portfolio applications

•

Portfolio reviews that have been accepted

• Some brokers are ‘walking away’ from portfolio landlord transactions • Lenders yet to recognise that their problems are passed onto brokers and landlords • This is an opportunity for specialist brokers & lenders to grow Source: Ltd Co Buy to Let Index Q4 2017, Mortgages for Business

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Changing behaviours – EPCs (F&G)

Source: Building Research Establishment Ltd. (BRE) Client Report 2014

Need to check the EPC rating of a property? Head over to mortgagesforbusiness.co.uk Call 0345 148 9086 Visit Stand 9

eTech system – Q1 2018

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eTech system – Q2 2018 (proposed)

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eTech: Broker portfolio view – EPC data

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eTech: Landlord page – landlord login

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The challenges in 2018… •

Portfolio landlords & brokers still adjusting post SS13/16 and lenders still grappling with underwriting standards, new processes & now EPCs

•

Q1 2016 – 2 years on – opportunity or challenge? o o

Product transfers – increasing percentage of your business Remortgage – can this happen for all your clients?

•

EPC standards landed on 1st April 2018 o Technology – too late in process o What is credit stance – industry is ‘silent’

•

Impact of interest rates on portfolios and tax returns

•

Landlords will start to realise impact of year 1 transition on tax either later in 2018 or around about 27th Jan 2019 Call 0345 148 9086 Visit Stand 9

Impact on basic tax rate landlord Laura is a landlord with a couple of residential investment properties. She pays £15k each year in buy to let mortgage interest. The properties generate £25k pa in rent. She also works full time earning an annual salary of £38,500. Impact: Negative.

Source: A guide to: Income Tax Relief Restrictions for Landlords, Mortgages for Business

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Changing behaviours: working together… Are the interfaces between landlord, broker and lender set to change from TRANSACTIONAL to ADVISORY? • Brokers and landlords activity managing the BTL Portfolio o Stress Tests (future impact) o EPC (plan for 10 year expiry) o The Buy to Let Hub (give landlords access) • Brokers and lenders improving product accessibility o Product Transfers (processes and reward) o Portfolio Stress Tests (ahead of AVM cost) o Should lenders consider different payment structures (Initial and trail) • Lenders and the lender community o Understand the PRA and work to the spirit of the rules o Ensure lending policies don’t conflict broader legislation.

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Changing behaviours: expert advice… Numerous opportunities today to challenge and learn about the future shape of the Buy to Let Market. • Break out presentations o Aldermore – Diversifying portfolios o BM Solutions – Application protocol o Landbay – Everything you need to know about HMOs & MUFBs o Paragon – Processing Ltd Co applications o Retirement Advantage – Later life lending on buy to let

• Lenders under the microscope o Chair – Doug Hall, 3MC o Lenders – o Phil Rickards, BM Solutions o Louisa Sedgwick, Vida Homeloans o Richard Tugwell, Together o Adrian Moloney, One Savings Bank • One-to-one surgery

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Thank you

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