November - December 2018
By Danny Robinson, Director of Commercial, Grey Matters Specialist Lending Ltd
With Brexit dominating everything past, present and future, it would be remiss to look back over the year without giving it a fleeting mention.
We have seen an impact on the value of housing and housing stock decline this past year as a direct result of Brexit with little sign of it improving as we head into 2019. That said, this has meant that the specialist lending market has seen an increased flow in applications due to its more flexible bespoke nature of risk appetite, whether it be within the bridging and development sector or the niche FTB mortgages available through challenger banks and building societies. All of this has kept the average broker on their toes and hopefully a little more attuned to the changing world of lending.
Looking forward to 2019, you do not need a crystal ball to know that Brexit will still dominate and sadly, as with all things, fear of the unknown will not result in corporations, SMEs or individuals making positive, informed decisions, and with the lack of investment in housing, I believe the trend will continue to be a downward one. Given the ‘in-out-shake-it-all-about’ attitude of MPs on the aforementioned, we can only hope that some sort of deal can be reached in order for us all to be able to plan ahead and bring some kind of stability to the economy.
Having said all that, I – like most people I have spoken to – have found myself becoming very apathetic towards the whole Brexit merry-go-round and adopted the view that what will be will be. Spilt milk notwithstanding, there is nothing we can do but carry on as normal.
What will be interesting to see this coming year, however, is how the industry tackles the white elephant that is portfolio lending, and in particular, incorporation of portfolios. It still puzzles me as to why landlords have not dealt with this issue prior to now. There has been no significant increase in enquiries to even suggest landlords are actually aware of the impending cost of owning a portfolio in individual names. Is it due to a lack of awareness? I hope not. Is it due to a lack of knowledge? Quite possibly. We, as brokers, should be in a position to discuss with our clients the merits of incorporation, but they first need to have considered it and I do not believe accountants are doing anywhere near enough to raise this issue with their clients. That is not to say that owning a portfolio in your own name is incorrect, but the fact remains there is a significant increase in cost for continuing to do so and we, as an industry, should be addressing it.
We have, of late, seen some industry peers holding roadshows and seminars on the subject of portfolios and incorporation, which is key if we are to tackle what is likely to be the next big issue in the coming year, but can lenders do more for portfolio landlords? There is no doubt that lenders have certainly improved their position on this due in part to the PRA changes that came into effect. That said, more can be done to ease the process of applications for multiple properties – either paper-based or online portals – as many are far too inflexible and time consuming. There is also plenty of scope for product enhancements that can deal with the added costs faced by landlords when incorporating. It would be nice to see this addressed in such a way that lenders can offer landlords the opportunity to borrow the additional costs, such as SDLT on top of their yield-based LTV lending limits. After all, if the landlord is incorporating, they will more than likely be improving their profitability through future tax savings.
Let’s watch this space and see what transpires.