Rob McCoy, TMA Senior Product & Business Manager recently met with Andrew Ferguson, Managing Director of Buy-to-Let, West One to get his thoughts on the current state of the BTL market and the upcoming opportunities for landlords.
RM: Tell us a bit about West One and where you sit in the BTL market:
AF: Being one of the largest non-bank lenders in the industry, West One Loans supports the intermediary market with our individual underwriting approach and we're renowned for our service and delivery.
West One now has one of the most comprehensive product ranges in the BTL market catering for both amateur and professional landlords either as individuals or through a limited company. We have enhanced our proposition to cater for larger portfolio landlords and to serve the wider ranging needs of all landlords.
Loans are all manually underwritten and available for houses, leasehold flats, maisonettes and new build properties. We specialise in complex transactions such as HMO/MUFBs, holiday lets (including first-time landlords) and will consider ex-pat applicants. We increased our HMO size to a maximum of 10 bedrooms, with MUFB properties available up to 10 units. Flats above commercial premises can also be considered.
RM: Can you describe the typical borrower profile for a West One BTL mortgage?
AF: Here at West One, we cater to board range of borrowers however there are some borrowers that particularly benefit from our comprehensive product range and manual underwriting approach including portfolio landlords, those borrowing via an SPV or borrowing on a specialist property, such as HMOs, MUFBs and Holiday Lets. In addition, our products lend themselves particularly well to experienced property developers who may be using buy-to-let as an exit option and require a lender with an understanding of the full property lifecycle, which West One can offer.
RM: What can brokers expect from West One in the next 6 - 12 months?
AF: We've seen a real demand for criteria-based solutions for borrowers with credit blips, large portfolio landlords and those investing in specialist properties such as HMOs and MUBs, as well as the green agenda. We will continue to be innovative with our products and focus on bespoke offerings which will be tailored to meet the needs of clients in today's world.
RM: So many lenders seem to be facing problems with service levels, what steps have West One taken to ensure a consistent and swift response time to brokers?
AF: We're proud to say that our service ethos underpins the whole organization and we've made sure that there are appropriate resources in the right places within the business to ensure that our SLA's are delivered the vast majority of the time. There have been times where we have deliberately slowed organisations so that we can manage our organisation pipeline well. In the past year, we have invested in new technology across the business including enhancing our BTL broker portal.
These updates have significantly improved and streamlined the customer experience for brokers from application through to completion, we are continually looking at changes that can enhance our customer journey.
As part of our service commitments, we have recruited dedicated personnel to manage, and develop our relationships. Overall, we have invested in our team over the last 12 months to ensure we have the right team in place to meet demand.
RM: 2022 has been challenging year for the buy-to-let market with increasing interest rates, that approach have you taken at West One to remain competitive?
AM: For me, the obvious choice has been to focus on differentiation through criteria and service. Our understanding of the complexities of the market and the personal circumstances of borrowers has helped us to gain a competitive advantage over those lenders that are reliant on price.
Sustainability of pricing has become much more of an issue in recent months, and we have been champions of this approach, ensuring we write good quality appropriately priced business in today's challenging market.
RM: What do you foresee as being the biggest threats to the BLT industry in 2023?
AM: Landlords and brokers that have been in the industry for under 10 years are facing somewhat unchartered territory, as rates are rapidly rising from the rock-bottom, sub-one per cent rates that had been in place since 2009. The increased cost of borrowing, combined with the ongoing cost of living crisis, may see some property investors retreat from the market and wait for market conditions to stabilize.
Another area for concern is the proposed changes to EPC regulations, with all new tenancies required to hold an EPC rating of 'C' by 025 and existing tenancies to follow suit by 2028. There are fears within the industry that landlords are unaware or underprepared of the work required and, in many instances, the costs involved. There are fears that landlords may simply choose to rid themselves if properties with an EPC rating below 'C', rather than investing time and money into the required upgrades.
I'm also keeping a close eye on the governments proposed PRS reforms and the planned abolition of the 'no fault' Section 21 evictions. There are fears that the removal of Section 21 will make a challenging market even tougher for landlords, potentially leading to a large number of landlords evicting tenants and selling their properties because they are worried about their ability to gain possession in the future, adding additional pressures to the limited rental stock.
RM: Currently, what do you see as the biggest opportunities for landlords?
AM: As the demand for rental properties continues to outstrip available stock, it's no surprise that HMOs (Home Multiple Occupation) and MUFBs (Multi-Unit Freehold Blocks) are proving popular with both tenants and landlords. With landlords benefiting from increased rental yields and a reduced risk of rental voids. Until the issue of lack of rental stock is addressed, I foresee HMOs and MUFBs continuing to be an area of growth with the buy-to-let industry.
Holiday Lets continue to be an area of opportunity for landlords, after the boom in staycations triggered by the pandemic. Landlords opting to invest in a holiday let over a traditional buy-to-let can expect much higher rental yields, as the daily or weekly charge for a holiday-let is considerably higher than a residential buy-to-let. As the cost of managing a buy-to-let property increases for landlords, we can expect to see more landlords looking at the ways in which they can maximise their profit margins via a limited company. Over the last few years, it has mainly been landlords that owned a large portfolio of properties moving towards incorporation, however I believe we are going to continue to see an increase in all type of landlords exploring the benefits a limited company can offer.
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