Mortgage brokers are positive about the health of the buy-to-let market; however they do have concerns about the potential for further growth in 2016, NatWest Intermediary Solutions has found.
In a survey conducted with 441 intermediaries, 66% said they had seen an increase in demand for buy-to-let mortgages from customers over the last six months with just 7% having experienced a decline. In terms of the types of customers brokers deal with, it appears that the market is polarised. 19% of brokers do the majority of their buy-to-let business with professional landlords, while 55% only do a small amount or no business with the professional sector.
Looking forward to the first part of this year, 32% expect to see a further increase in buy-to-let business. However, 41% actually expect to see a decrease. 27% expect it to remain stable.
The best prospects for growth are seen to be remortgaging (37%) and amateur landlords with two or fewer properties (23%). Amateur landlords with more than two properties (18%) were seen as the next most attractive sector while 11% thought that professional landlords were going to offer the best prospects.
When it came to the issues concerning landlords, regulation and tenant behaviour/protection topped the list. 59% identified increased regulation as the most concerning issue, followed by rental voids (35%), rental arrears (34%) and the costs of property maintenance (20%). General tenant referencing and administration is also quite a concern at 13%.
The research highlighted what brokers believe to be the most important aspects of a lender’s buy-to-let proposition. They are:
- Availability of interest only
- Clear lending criteria
- Straightforward rental cover calculation
- Good BDM support
- Flexible underwriting
Graham Felstead, head of NatWest Intermediary Solutions said: “The results of our survey suggest that the buy-to-let market will continue to be an attractive one for mortgage brokers. However, it does appear that some of the uncertainty surrounding the interpretation of the new Mortgage Credit Directive, the new tax regime for landlords and the government’s focus on boosting home ownership has muted the optimism for further growth amongst a sizeable number of brokers. We may well witness a ‘wait and see’ approach by many until the new factors bed in.
“Brokers are looking to lenders for clear, consistent and uncomplicated criteria, affordability calculations and underwriting, good BDM support and the availability of interest only. Whilst not surprising, the challenge for lenders is to meet these expectations. We have made great in-roads into the buy-to-let sector having simplified our rental cover calculation, improved criteria and armed our BDMs with more support. We are keen to grow further our presence in this sector as we journey through 2016.”
