Opportunity knocks for lenders who fill market gaps
Andy Virgo is director of buy-to-let at LendInvest
To say that 2020 has been challenging may be the world’s greatest understatement.
But just as the lockdown gave homeowners and investors the opportunity to review what they really wanted from their properties, so too has it given lenders the chance to step back and reassess where they want to be active.
For some that has meant doing less.
But for other lenders, it’s been an opportunity to review the areas of the buy-to-let market that are currently underserved, and how we can meet that need.
One area that our team has moved into more significantly has been student lets.
This was of course a part of the market that saw significant uncertainty as the nation left the initial lockdown, as it simply wasn’t clear quite how courses were going to be run.
But there’s no question that students want to enjoy the traditional student experience that comes from living near the campus with their peers, and as such it remains an attractive sector of the market for landlords.
So we wanted to support that by launching dedicated funding for student let HMOs, restricting this to properties of up to six bedrooms given the ongoing COVID-19 situation.
New build properties are another area that have been underserved by lenders, but which still enjoy clear demand for buy-to-let financing.
We have worked closely with developers for years now, and have seen first hand some fantastic projects which are completed but haven’t yet been sold onto owner occupiers.
That may be because the first-time buyers and second steppers who would normally have snapped them up have been forced to delay their next purchase, perhaps because they have been placed on furlough or because they are uncertain about their job prospects in the months ahead.
These are good quality properties that many developers are now retaining and letting out as buy-to-lets, but they need the funding to do it.
Then there are first-time landlords.
Brokers across the country will know only too well the spike in interest seen from people who have decided to take the plunge and move into property investment.
There’s no denying that the last few years have made the prospect of buy-to-let somewhat less attractive for those smaller landlords as a result of a host of measures from the government and regulator, such as the additional stamp duty rate and the stripping back of tax reliefs.
But there remain gains to be made, and with the Stamp Duty holiday applying to landlords ‒ and the lack of decent investment options elsewhere ‒ there has been a growth in interest from those serious about putting their money into bricks and mortar.
There has also been increased demand from those who want to put serious money into their bricks and mortar investments, who want to add more high-end, quality properties to their portfolios.
It’s because of that demand from brokers and their clients that we have hiked our maximum loan size to £1.5m.
Of course, it’s not enough for a lender to simply spot an area of the market that isn’t hugely well served and jump in headfirst.
You have to do proper due diligence, and get an idea of what level of risk you’re willing to accept.
Thankfully experience can prove invaluable here, which is why it pays for lenders to invest in experienced underwriters and risk managers, to ensure that not only the products for these new areas are designed in a secure, responsible way, but that each individual case is assessed properly too.
The reality is that there remains firm demand among property investors of all stripes, from first-timers to developers who are adapting their exit strategies.
And it’s up to lenders who have an appetite to write business, and a diverse range of funding sources to support that lending, to look carefully at what brokers and their clients really need.
By being innovative we can end 2020 far more positively than could have seemed possible just a few months ago.