Technology Is Helping The Buy-To-Let Transition Phase
This article was originally published in Mortgage Introducer, Mar18, pg53.
It’s been almost six months since the introduction of the Prudential Regulation Authority’s new underwriting standards for portfolio landlords, following a review of the buy-to-let market in 2015/16. Since then, regulatory scrutiny has been applied to bricks and mortar assets for the first time as well as to prospective borrowers, with landlords of four or more properties required to submit income and mortgage details on their entire portfolio each time they require new mortgage finance.
Mortgage intermediaries have been quick to adapt to the new regulatory regime, harnessing digital technology to facilitate portfolio submissions. The new regulatory challenges have placed additional burdens on brokers, lenders and landlords alike, but with the right systems in place to manage the increased workload, negotiating the PRA’s rules has been dramatically simplified, bringing stakeholders closer together and generating increased business for those who’ve been early adopters of online solutions.
It has been interesting to see sourcing of product respond in this new world, eTech’s Buy-to-Let Hub certainly allows lender selection as part of its offering, given the increasing number of lenders residing in its online community. However, vast amounts of additional functionality make it an online tool of choice, with easy submission of portfolio data including portfolio cloning, the ability to link to AVM providers of choice, and fully configurable lender rules on interest rates, thresholds and tolerances. The burden of manual data gathering is completely removed, and the fact lenders can configure rules in real time according to their appetite for risk means loan applications can be responded to far more quickly and accurately, giving everyone involved more confidence in lending decisions.
Our experience suggests strong bedding in has occurred but the real questions are what will the next six months bring us and where does technology feature? Aligning a regulatory imperative as part of the online sales and submission journey was a logical first step, and the PRA new standards provided a unique opportunity for technology providers to incorporate compliance into the digital portfolio submission process. In the increasingly specialist sector of buy-to-let, the ability to conduct an end to end journey of online portfolio submission online manages the new PRA rules for all participants, leading to improved standards and better connectivity in what could have been a fragmented market. There is no need for lenders to go native and be apart from a market using single market solutions in this case the Buy to Let Hub.
In an ever-evolving market, technology needs to be quick to respond to changes in the industry, and further developments are constant. Since launching in September 2017, investments in BTL Hub have included access to EPC rating data, in response to the MEES obligation for landlords to demonstrate levels of energy efficiency when granting new tenancies. From April 2018, this requirement will become more stringent, making it unlawful for landlords to rent properties with an EPC rating below E. Other stakeholders in the private rented sector will subsequently be affected, with potential consequences for lenders in the event landlords are unable to make repayments due to loss of rental income and/or remediation costs. With this additional functionality already available to those using BTL Hub, such concerns are eased, further reducing the burden of compliance. Additionally, new landlord functionality allowing a broker to strengthen their relationships with these clients is bringing further harmony and a more cohesive Buy to Let online community.
The growth we are seeing with new lenders coming on board and fresh requirements being captured as part of the product’s ongoing evolution, intermediaries will be looking to all their lender partners to ensure their online portfolio submission strategy is clearly communicated and not isolating themselves from being used. Lenders not currently working in this way may experience polite pressure from brokers to join in, lest they start to miss out on business. Six months ago the chatter was about new rules and policies to meet the regulatory guidelines, right now there’s the new year scramble for market share and overarching all of this is the subject of ease of doing business and how this can improve.
In introducing the new rules on underwriting, the PRA’s intention was to reduce riskier lending decisions and improve standards, lenders now have better quality data that should lead to better lending decisions that withstand increased scrutiny. The market may feel better controlled by the regulator but it is certainly better connected. With a growing number of BTL Hub users, we’re confident that this represents only the start of a wider journey to align stakeholders within the buy-to-let market and look forward to bringing yet more functionality in response to the demands of our ever-changing industry.