"It makes sense to me that brokers need to diversify in the same way to make sure that they can offer all of these various solutions for their client bank."
- Jaxon Stevens, Tuscan Capital
Diversifying into new product areas is crucial in the current lending climate, a panel of lenders at the recent Mortgage Adviser Event London agreed.
Speaking in the Modern Lender seminar theatre, the panel - featuring Tanya Elmez from Together, Adrian Moloney from OSB Group, Andrea Glasgow from Hampshire Trust Bank, and Jaxon Stevens from Tuscan Capital - explored how advisers can provide more solutions to customers and expand into the buy-to-let, bridging, second charge, commercial and development finance markets.
Highlighting the current buy-to-let market, Jaxon Stevens said: Landlords are diversifying in the way that they transact their business, and lenders have had to diversify to keep up with that demand. It makes sense to me that brokers need to diversify in the same way to make sure that they can offer all of these various solutions for their client bank. If it isn't something you can do yourself, team up with someone who is an expert in that field, because there's lots and lots of opportunity within the specialist sectors that you want to keep on your desk with business you should be writing yourself."
Tanya Elmez commented: "I would just add to that diversification message, get to know more lenders, because the specialist lenders out there want to say yes. We're the ones that apply flexibility and common sense, we're the ones that can go off the page with policy and criteria. So if specialist lenders are not your go to, be open minded to them. And if you can't access them directly yourself, reach out to a packager, network or a club who can."
Andrea Glasgow added: "Engage with the specialist lenders and the challenger banks, regardless of how new they are into the market - they will be the most knowledgeable and educational."
Turning to current affordability issues in the buy-to-let market, Adrian Moloney discussed top slicing and varying fee structures that many lenders have introduced to help with affordability.
Adrian said: "When I started out in buy-to-let quite a long time ago, I worked for a mainstream lender and we were the first lender that launched a product with a one and a half per cent fee. And people said "You'll never sell any of it, landlords won't take it", and guess what, they're the biggest buy-to-let lender in the UK now and it was their most successful ever product.
"And as rates go up, landlords adapt, and the fees have gone up. They've gone "In the grand scheme of things, I can take the fee, I've got the equity, it makes the ICR work and away we go"."
Discussing ongoing positives in the buy-to-let market, Andrea said: "We are still seeing foreign investors looking to invest in the UK, and even more so we're seeing first time landlords, probably more than we ever have done.
"We are seeing more holiday lets and large, small and medium HMOs. We're also seeing purpose built student accommodation because those properties are seeing the higher rental yield which is able to help them overcome the ICR and serviceability issues. At the moment, all of your portfolio landlords will be reviewing their portfolios and looking at their returns, they'll be doing rent reviews and they may have already started. What they also may be doing is looking at different ways to rent those properties. So definitely have reached out and have a conversation with your clients about those."
The panel then discussed new entrants into the specialist lending markets and whether the second charge market will continue to expand.
Tanya said: "With regards to the new entrants, I think where the second charge market is going is really interesting. Already this year, figures show that lending is up by 11% on 2022 huge billion pounds of lending. And loan sizes are also up as well. So it's a very buoyant year for second charges. I think that the use for second charges is really interesting. We might fall into the category of assuming that second chances are just for debt consolidation or home improvements. But of course they can be used for a number of purposes, even paying tax bills, and school fees might be a new one after the Labour Party get in. And you can have a second charge loan for £25,000 or £500,000. I think as long as lenders continue to grow and broaden their criteria and make it quicker and easier for borrowers, then it will continue to be a buoyant market."
You can watch the full panel session from Mortgage Adviser Event London in the video at the top of this article.
