Www.landlords.org.uk To promote and protect private residential landlords A Bright Future for Buy to Let NLA Mortgages Andrew Rudkin.

www.landlords.org.uk To promote and protect private residential landlords

A Bright Future for Buy to LetA Bright Future for Buy to Let

NLA MortgagesAndrew Rudkin


Agenda

• Introduction• Is this a good time to be a Landlord?• The BTL marketplace• Looking forward• Paragon Mortgages / Mortgage Trust• NLA Mortgages• Summary and Questions


Introduction

• Provided by TBMC Group• Award winning specialist broker and distributor• Systems and expertise• Paragon Group


Owner-occupation and social renting in decline

4

• UK owner-occupation

peaked at 69.7% in

2002 – fell to 64.7% by

2011

• Social housing fallen to

18.1% from 24.4% in

1993

• Social housing peaked

at 30% in 1971

% %

Source: DCLG

Owner-occupiers and social renters


Owner-occupation and social renting in decline

5

PRS currently accounts for 17.2% of housing stock in the UK

Savills forecasts PRS will account for 27% by 2020

PRS is the only growing housing tenure

- increased by 93% since 2001

4.7 million (more than one in six) properties

Forecast to grow to 5.8 million by 2018

Provides vital accommodation for diverse range of tenants,

including mobile workers, young professionals, students,

economic migrants

Important social role - housing people on low incomes, with

25% of PRS in receipt of Housing Benefit

Makes an important economic contribution

UK PRS worth £500 billion - larger than UK commercial

property sector

00

0s

unit

s

Source: DCLG/CB Richard Ellis/Savills

UK private rented sector

1988 Housing Act

BTL introduced


Why is now a good time to be a landlord?

• Property Prices.• Average current property prices up 7.1% on 2012• Future property prices? ...forecasts reflect continued

steady growth. • Supply & demand – current shortage of around 1 million

homes in UK.

• New housing remain at low levels• Normally around 175,000 units per annum• 142,000 completed in 2011

• Need to build 240,000 new homes each year


• 1.8m people currently on council house waiting lists in England • Up 10% over last 5 years

• Increasing Rents.• Average rental return of 5% for houses and 5.2% for flats• 39% of landlords increased rents in Q4 2013

• Outlook for Private Rented Sector.• PRS is growing – • up from 10.1% of housing stock in UK to 17.2% in 2011

and predicted to increase to 27% by 2020 (Savills)

Why is now a good time to be a Landlord?


• Tenant Demand Remains Strong• Mortgages for first time buyers still difficult with stringent

underwriting criteria• Growing student population.• Growing immigrant population.• Mobile workforce.• Split families.• Personal choice...movement towards European market?• Average void period – 3 weeks• 46% of ARLA agents reported more tenants than

properties

Why is now a good time to be a Landlord?


The Buy to Let Marketplace

The BTL marketplace


10

Impact of financial crisis

Recovery

• Competition vastly reduced

• Market dominated by two lenders

• Criteria more restricted

• Higher gross margins reflect high cost of

funds and capital

• Particular shortage of products for

professional landlords

• BTL seen as low risk / higher margin

opportunity for lenders

• More lenders/more funding/more

products

• Underwriting more flexible and criteria

improving

• Lloyds and Nationwide still dominate

Lenders


• The Buy to Let MarketplaceTotal Market BTL Market % Share

• Estimated natural Buy to Let mortgage market - £25bn - £30bn

Total Market BTL Market % Share

2007 £360bn £45bn 12.6%

2011 £140bn £14bn 10%

2012 £143bn £16.4bn 11.5%

2013 (estimate) £170bn £20bn 11.7%

Buy to Let Lending


Buy to Let Lending

Majority of lenders impose stifling aggregate lending limits


• Only a few specialist BTL lenders cater for the

professional landlord sector - Paragon, Aldermore, Kent

Reliance and TMW.

• What differentiates the professional sector?

• HMOs and multi unit properties

• Variety of tenant types (including DSS and students)

• Larger portfolios

• Limited company lending

• More complicated underwriting propositions

• Larger lending limits

Lenders and their approach to market


Buy to Let

Looking forward


• Continued recovery in 2014 with more lenders• Concentration on mainstream buy to let • There are now 30 plus lenders offering a wide range of

products • Overall Buy to Let lending has proven to be very resilient

during the crises with many lenders reporting lower arrears than residential mortgages

The Buy to Let Marketplace


The Buy to Let Marketplace – looking forward

• Mortgage products:• More choice – fixed rates/discounts/trackers• Easing of rental requirements• Increase in available products

• Over 2000 products available in 2007• Down to less than 80 in 2008• Over 400 products now available and expected to

increase


• Paragon Mortgages• Professional landlords

• HMOs – 3 years experience as a landlord• Multi Unit properties – max 20 units, 3 years experience• Limited company Lending• Under 6 month ownership remortgages• Portfolio lending up to £5m • Lending up to 75% LTV• Maximum loan £2m per property• No restriction to number of properties in a portfolioAll the above difficult to place elsewhere!



• Wide range of acceptable tenancies• ASTs (6-12 months)• Student and Housing Benefit tenants• Company lets (up to 3 years)• Local Authorities and Housing Associations (up to 5 years)

• New Build• Experienced “In house” surveyors• Rental calculation assessed on individual or joint tenancy



• Mortgage Trust • Simple BTL product range• Simple application process, immediate decision • Competitive rates• Standard properties, single ASTs

• Available through NLA mortgages



NLA Mortgages

• Bespoke mortgage service for NLA members• Whole of market offering

• Currently 30 Lenders with close to 400 products• Self select from a web based sourcing system• Cash back incentive on all products available for NLA

members only• Website – www.nlamortgages.co.uk• Helpline – 02920 695 555



Summary

• Private rented sector will continue to grow and is a vital part of housing infrastructure in the U K

• BTL is good business for Lenders but a specialist area• Traditional & new Lenders will emerge into the market• More products and special deals will become available• Still a good time to be a Landlord


Questions

Questions

Www.landlords.org.uk To promote and protect private residential landlords A Bright Future for Buy to Let NLA Mortgages Andrew Rudkin.

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