In a constantly evolving mortgage market and challenging economic landscape, borrowing requirements have become increasingly diverse and complex.
Therefore, for both lenders and intermediaries, it has become essential to fully appreciate the unique scenarios faced by various customer types. And, as importantly, have the appetite, compliance processes and underwriting capabilities in place to deliver a range of competitive and responsible solutions.
This is particularly evident in the buy-to-let sector, where there is a growing emphasis on providing tailored solutions to meet the specific needs of landlord clients, especially when it comes to consumer buy-to-let (CBTL) mortgages.
Getting back to basics, CBTL caters to a particular group of property owners often referred to as ‘accidental landlords.’
These individuals may not have initially intended to become landlords but have found themselves in situations where renting out a property is the most practical or financially viable option.
Common scenarios include:
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- Property inheritance: An individual inherits a property and, instead of selling it, chooses to let it out for income.
- Moving in with a partner: A homeowner moves in with their partner and decides to retain their existing property as a rental investment.
- Job relocation: Some clients relocate for work and opt to rent out their previous main residence rather than sell it, particularly if they plan to return to it in the future. This may include moving abroad, making them an expat for mortgage purposes.
- Remortgaging: Clients may seek to remortgage their current residence to a buy-to-let mortgage to raise capital for purchasing a new home.
Nurturing all landlords
Unlike portfolio landlords, who typically have extensive knowledge of property investment and management, accidental landlords often require a more tailored and supportive approach that takes into account their unique circumstances and limited experience.
Typically, the scenario has emerged for them, so they have not spent years preparing and planning for managing a property as an investment. This is where the advisory process becomes essential in identifying the specific challenges and opportunities they face as well as raising the potential risks, as well as connecting them with the appropriate lending partner.
Taking on a rental property unexpectedly can be particularly challenging in this economic climate.
Factors such as rising interest rates and inflation have increased the cost of borrowing and managing rental properties, putting pressure on landlords’ margins in recent years. However, with mortgage rates becoming more competitive, there is renewed optimism for all landlords who can adapt to regulatory changes, invest in property improvements, and align their offerings with tenant demands to optimise their investments and maintain long-term profitability.
The ongoing housing shortage in the UK also further underpins the demand for rental properties, ensuring that the CBTL market remains resilient and a key component within the UK rental sector.
For lenders, the focus is on maintaining a robust and diverse buy-to-let offering that aligns with current market demand. We believe that expanding our criteria to include CBTL as standard is a highly beneficial move for both our business and the wider buy-to-let market. By offering solutions that cater to the needs of accidental landlords, we can better serve a broader range of clients, ensuring that more landlords have access to products tailored to their unique circumstances.
And this will remain key in ensuring that intermediary partners and their landlord clients enjoy a more personalised and effective mortgage experience moving forward.
