most acquisitive at the moment, while ‘smaller’ private landlords are more likely to be sitting tight in terms of growth ambitions. Overall a quarter (24%) of current


borrowers state they are likely to look for new buy-to-let lending in the next three months, with 9% of them saying they are very likely to do so. However, lending criteria is also an area that comes in for criticism from some landlords: “In order to encourage growth in this sector, lenders must be prepared to consider people who do not tick all the boxes. As I have spent practically all my income/ profits on re-investment over the last few years, my income does not look good on paper and mortgage companies and banks do not take into consideration the size of my portfolio or gross income.” But the research carries some good


news for mortgage introducers. When it comes to sourcing buy-to-let loans, private landlords remain wedded to the intermediary channel. Around 51% say


they would rather deal with buy-to-let lenders via a broker or intermediary, while industry data suggests that over nine in 10 new buy-to-let loans are placed via the broker channel. Asked what influenced their most


recent lender choice of buy-to-let lender, intermediary advice is cited by 42% landlords - second only to product interest rates (45%).


DIRect aPPlIcatIonS However, there’s also a note of warning for intermediaries: looking forward, BDRC Continental’s research indicates an emerging appetite among private landlords for direct offers. Around 21% of all landlords agree


‘strongly’ that they will approach a lender directly the next time they need funding, including the more experienced private


landlords who may have been through the buy-to-let application cycle a large number of times. Similarly, buy-to-let lenders seem


increasingly open to the idea of offering a more holistic, advice-based service to private landlords, for example helping to educate them about their legal obligations, marketing their rental properties most effectively and becoming


generally more profitable in their lettings business. We believe it’s


worth keeping a watchful eye on the steps some lenders are making in this direction. But of course


private landlords are not a homogenous group. On one hand, some private landlords are crying out for greater buy-to-let product supply, on the other, a significant minority are concerned about the impact of potential interest rate rises in the buy-to-let market on their profitability. Asked for their response on the impact


a hypothetical 2% interest rate rise would have on their profitability, most landlords – 81% - said a 2% rise in rates would have a negative impact on profitability overall, split evenly between a marginal and significant effect. This means that only one in seven


could absorb this kind of increase without any effect on their overall profitability. For the majority, there would be at least a marginally negative impact. More positively from a lender’s perspective, only a very small proportion (3%) would have to fundamentally rethink their future as a landlord. But it isn’t just the prospect of interest


rate rises that concern landlords. There are a range of other, regular ‘headaches.’ In the last 12 months, common problems include: arrears, damage, anti-social behaviour, legal issues and insurance claims.


aRReaRS Worryingly, the incidence of rental arrears has been increasing inexorably over the past few


[Table 2]


years, but BDRC Continental trend data shows that this growth, if not the size, of the financial hit may have reached a plateau lately. Where money is outstanding, an average landlord is owed around £2,700 in unpaid rent. So, the popular perception of private


landlords simply raking in the cash is an erroneous one. The costs of maintaining a property portfolio are significant, while rental arrears and the prospect of interest rate rises are on- going concerns. But the Landlords Panel shows that private landlords are incredibly committed to the sector and for many the purpose of that commitment is not only to generate an income now. It is to help fund their own retirement plans. That really does mean they are in it for the long haul. n


[Table 3] Landlord Headaches


% of landlords facing ‘regular headache’. Source: BDRC Continental Landlords Panel Q3 2011, 528 landlords


mortgage introducer DECEMBER 2011 35


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