March was an extremely busy month for the buy to let industry as we all raced to get deals over the line before the introduction of the 3% stamp duty surcharge.
I am glad to say that my teams at both Mortgages for Business and Keystone coped extremely well; they were focused and hard-working and, for an overwhelming majority of cases, we were successful in getting completions done before the deadline.
We are now more than half way through April and although we are certainly not quite so frantically busy, I am happy to report that both landlords and lenders are still active even if some solicitors seem to have gone AWOL. Perhaps they’ve gone on holiday having been ‘over-worked’ in March…
We continue to see an uptick in landlords switching to corporate vehicles, principally SPVs. In Q1 2016, our transactional data shows that by case count 41% of buy to let applications were made by limited companies that’s up from just 18% last year. Actual completions for limited companies were also high - 39% in March alone.
Lenders of course are playing their part. At the end of Q1 2016, of the 33 active buy to let lenders we track, 12 were offering some 153 products to limited companies out of a total product count of 1,103.
Bearing in mind that’s just a snapshot on one day, I feel that is more than enough for the moment, although I know of three new buy to let lenders coming to market in Q2 and Q3 who will have limited company products from the outset. It will be interesting to see what they bring to the table.
Again using the same snapshot data, products for limited companies are slightly more expensive than those aimed at individual borrowers (see table) due to the increased underwriting involved.
Ltd Co BTL Products
|All BTL Products|
|No.||Av. Cost||No.||Av. Cost|
|2 year fixed||29||4.5%||366||3.2%|
|3 year fixed||28||4.3%||169||3.7%|
|5 year fixed||34||4.7%||284||3.9%|
Since my February BTL Watch, I should mention that Keystone has joined the likes of Paragon Mortgages, Metro Bank and Foundation Home Loans in offering the same rates to both limited company and individual borrowers.
Like them, for now, we (Keystone) have chosen to absorb the extra underwriting costs internally instead of passing them on to customers. This change has so far proved quite popular with borrowers looking for finance through their trading limited companies, as Paragon Mortgages, Metro Bank and Foundation Home Loans only cater to SPVs.
Those lenders currently without a limited company proposition are coming to market as and when they can. For some, the “lift and shift” on technology and skills training is a vast exercise. Personally I would rather they get it right in another six months than come to market too quickly and get it wrong.
After all, lenders have a lot on their plates - the prospect of FPC intervention, the outcomes of the PRA’s consultation paper, CP11/16 as yet to be seen and the likely increase in Risk Capital under Basel III does not make buy to let a “slam dunk” proposition with further rain clouds on the horizon.
The market evolves to meet demand. For lenders and landlords I’m confident that this is exactly what is happening!!