New analysis from Finova suggests that, despite strong margins and lower perceived risk, specialist buy-to-let borrowers with complex needs remain the most underserved in the market.
Finova has cautioned that the continued growth of specialist buy-to-let lending may be constrained unless lenders improve support for borrowers with more complex profiles.
The warning follows new research showing that, although specialist products often generate higher returns and are viewed as lower risk, the borrowers driving demand still face significant barriers.
MARGINS STRONGEST IN HOLIDAY LETS
The study found that, among lenders active in specialist buy-to-let, holiday lets were most commonly identified as delivering the highest margins, cited by just over one in five respondents.
Limited company and HMO mortgages followed closely, while commercial buy-to-let products ranked slightly lower.
Despite the positive outlook, lenders also acknowledged that the segment most associated with specialist buy-to-let — borrowers with complex needs — is the least well served in today’s market.
Just over four in 10 said this group faces the greatest difficulty accessing finance.
CONFIDENCE IN SPECIALIST BTL RISK PROFILE
The report suggests that specialist buy-to-let has become a firmly established part of lenders’ portfolios. Many lenders indicated that default risk was lower on limited company borrowing, HMOs and portfolio landlord cases than on mainstream lending.
Brokers expressed similar views, with just under half deeming the default risk across specialist products to be low.
Both lenders and brokers highlighted areas where they expect the strongest future growth. Lenders pointed towards HMOs, multi-unit blocks and limited company borrowing, while brokers were more likely to identify green mortgages as an area with significant potential.
COMPLEX BORROWERS STILL STRUGGLING
The findings also underline the challenges still facing borrowers whose circumstances fall outside standard criteria.
Alongside complex borrowers, lenders pointed to expat clients and those seeking finance for holiday lets or multiple properties as groups that continue to face obstacles.
Brokers reported practical issues that can hinder specialist applications, including difficulties securing finance for properties with lower EPC ratings, the documentation demands of corporate structures, and limited product choice for unusual properties.
A further hurdle is technological. Fewer than one in three lenders currently operates a standalone originations platform for specialist lending.
Some lenders, however, signalled that change may be coming, with more than one third actively considering introducing one.
CALL FOR LENDERS TO MODERNISE
Hamza Behzad, business development director at Finova, said: “The growth of the specialist buy-to-let market is too significant to ignore.
“What was once a niche segment is now a core part of many lenders’ strategies — but the nature of the customer has changed dramatically.
“Today’s specialist borrowers are more complex, and legacy systems weren’t built to support the nuanced affordability assessments or KYB/KYC checks they require.
“Our research shows that while these products offer stronger margins and lower risk, many lenders are still relying on rigid processes that can’t keep up.
“To grow sustainably, lenders need to adapt. Those that invest in better tools and work closely with brokers to serve these customers more effectively will be best placed to lead the next era of specialist lending.”
