Steve Walker, managing director, Promise Solutions reckons growth in the second charge market will continue for the foreseeable future.
The rise of buy-to-let continues apace, despite a challenging few weeks for the sector. The government’s proposed plans to reduce landlord tax relief may have some investors concerned for the future but for the present at least confidence in the sector is stronger than ever. Indeed, according to the most recent figures from the Council of Mortgage Lenders buy-to-let lending in June was up on both the month before and the same period last year.
Perhaps as further proof of the buoyancy of the sector, a number of second charge lenders are moving in to the buy-to-let arena, having spotted the potential. There are now 14 lenders operating in the buy-to-let market with Precise the latest to do so and rate start at 5.79%.
Buy-to-let presents brokers with a huge opportunity however I believe a large number are missing out on this opportunity because they’re either unaware of the uses of seconds in this area or they still hold ill-conceived misconceptions about the industry.
According to figures from the Council of Mortgage Lenders, around 60% of new business in the buy-to-let sector is remortgage as opposed to purchase. Those landlords remortgaging to raise the funds to buy additional properties and increase their portfolio may well have attractive mortgage rates at present that they’d rather not give up. A second charge allows an investor to secure funding against one of his rental properties to buy another property or, perhaps, to complete necessary works on a property in order to increase its rental potential.
And the benefits go beyond helping a landlord to maintain a favourable rate. The buy-to-let market is fast-paced and investors needs to move quickly. The remortgage market cannot compete with the second charge sector when it comes to speed. And while the bridging market may offer some competition for second charges in terms of efficiency, the rates and terms on offer are much less favourable.
Second charge buy-to-lets can be approved even when there is no tenant in place or when the borrower has adverse credit. They’re available up to 100% LTV and can be arranged based on rental income only with no additional income required.
Secured loans now offer an efficient, transparent and cost effective alternative for investors looking to build and improve their portfolios and, with the industry set to be brought in line with its first charge cousin in the first quarter of next year, it’s imperative that brokers start giving it due consideration.
I don’t think we will see the growth of the buy-to-let seconds market slow at any time soon. If you’re not willing to embrace it you risk alienating not just your clients but your regulator too.