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January 8, 2020

Raising the standards of Buy-to-Let in 2020

As we look ahead to what 2020 might have in store, our Sales Director Ian Boden has considered what increased professionalism in the property sector means for landlords, brokers and lenders. 

He considered:- 

  • What regulatory and government changes means for landlords
  • The bigger role brokers play in offering advice
  • The need for lenders to raise expectations rather than just meet the minimum

He wrote about these topics in greater depth for Bridging & Commercial

It’s no secret that the authorities want to see more professionalism among landlords. 

We’ve seen tax changes such as the higher rate of stamp duty on additional purchases and changes to tax reliefs, which has been reinforced by factors like licensing for houses in multiple occupation (HMOs).

More changes are incoming following rules forcing landlords to ensure that properties had a minimum energy performance rating of ‘E’ for all new lets and renewals of tenancies. 

This will be extended from 1st April 2020 to cover all existing tenancies too, and if a landlord fails to meet those requirements, they will be subject to a penalty of up to £4,000.

The message is clear: letting out a property needs to be treated seriously and not just as a money-making sideline.

Read more: Case study: 75% LTV Buy-to-Let mortgage

Brokers have a greater role to play

Just as landlords have higher expectations to meet, brokers also have a bigger role to play in terms of the advice offered.

It’s not unusual for lenders in this market to see cases which are really HMOs, but this fact not reflected in the application. For whatever reason, neither the landlord nor the broker has grasped this.

This impacts their financing options, but also there are different legal requirements and responsibilities for landlords letting out HMO properties compared with, for example, a traditional two-bedroom house. 

There is a real opportunity to provide a little more expertise and guidance, and for brokers to help their clients avoid what may end up being costly oversights. 

As an industry, advisers need to be on the front foot, fully informed about what is changing well in advance.

This isn’t isolated just to HMO cases. As rules change across the board for borrowers, the best brokers resist merely taking orders and instead deliver a level of advice that ensures their clients end up in the best possible financial position. 

As an industry, there is far more that we can do to help educate brokers on important developments and arm them with the tools they need to provide their clients with the most comprehensive advice possible.

Read more: What makes our Buy-to-Let mortgages different?

Raising expectations

Lenders have more work to do in improving our standards, too. As a lender, we are committed to not just delivering the minimum, but lead the charge in raising those expectations.

For five straight years, the European credit rating agency ARC Ratings has awarded us with its highest possible grading for our loan servicing, while we ensured that the portfolio of assets included in our first securitisation earlier this year was of a suitably high standard to be awarded a AAA rating by Moody’s and Fitch.

Our desire to offer a better service to brokers and their clients informs our drive to work with more mortgage clubs, having already partnered with SimplyBiz, Paradigm, MCI and Brilliant Solutions.

In this hyper-competitive market, brokers and lenders alike need to be at the forefront when it comes to improving standards. 

Standing still may as well be going backwards — we all need to focus on keeping on top of what’s changing and developing new and improved ways to work.

Get started on your next Buy-to-Let by getting an instant quote in our online calculator.

A version of this article originally appeared in Bridging & Commercial