Late November saw Accord join Birmingham Midshires, The Mortgage Works and NatWest in requiring no minimum income for landlords — the latter lender having joined this group earlier in the year.

Does this signal a radical change in the buy-to-let (BTL) market, or is it merely a sensible next step for the sector? Mortgage Strategy consulted the experts.

The first question we asked was to what type of borrower this was likely to appeal.

The specialist market will hold its own. High-street lenders do not want or have the processing capabilities to deal with the too complex

Connect Mortgages chief executive Liz Syms nominates “smaller first-time landlords” and the self-employed who haven’t quite managed to scrape together the previous minimum income because of Covid difficulties.

Meanwhile, Private Finance associate director Chris Sykes thinks “those who have three or four properties” will most welcome the news, “because these lenders do not allow large property portfolios generally”.

Sykes continues: “It will also affect customers who go direct to NatWest, for example, and so don’t access the whole of the market. They may be a customer with brand loyalty who may have been turned away for a BTL mortgage in the past but now qualifies,” he says.

I think we’ll see innovations in service and process

Mortgages for Business development director Jeni Browne believes “this is opening the market up to those on lower incomes, such as the retired and homemakers”.

Vantage Finance managing director Lucy Barrett says: “We see a range here, from the one landlord with a part-time job and low personal expenditure who manages their finances closely, to asset-rich clients who may have stopped working recently or are taking a break between employment and who don’t need to sit in specialist or complex BTL and can qualify for high-street lending.”

Syms points out, however, that, because NatWest and latterly Accord have merely brought themselves in line with other lenders, it is more interesting to ask why they have made these changes.

She explains: “Specialist lenders are more competitive now, and this is going to eat into business that Accord and NatWest would otherwise get. They therefore have to look at their criteria to make them more attractive.”

I would like to see lenders really embrace the green proposition and drive it

Browne adds that the residential housing market is likely to slow next year, “so it’s natural that lenders take the opportunity to make improvements… to drive up application numbers”, and Barrett points to service as another area she expects BTL lenders to focus on in the quest to bring in more business.

“I don’t foresee much more rate compression. Therefore a focus on criteria and service has to be a key driver for lenders,” she explains.

Barrett continues: “We have seen more high-street banks creep into the fringes of specialist lenders’ criteria and, while it really is the fringes only, this is likely to continue as lenders evaluate growth opportunities.

“[However], the specialist market will hold its own because high-street lenders do not want or have the processing capabilities to deal with the too complex.”

This is opening the market up to those on lower incomes, such as the retired and homemakers

It’s a vision Syms has too: “I can foresee a merging between high-street and specialist lenders.

“In the past, specialist lenders weren’t able to be as competitive. With Basel IV coming up [in 2023], some of the small banks will be able to compete on rates.

“In the next 12 to 18 months we may also see the emergence of the ‘complex specialist’,” she continues.

“They will go right up the risk curve. You can already see some of the specialist lenders moving in this way.”

And what changes in the BTL space would our team of experts like to see? Sykes is quick to answer.

I can foresee a merging between high-street and specialist lenders

“We’d love to see more high-street lenders offer limited company mortgages as this is the step a lot of landlords have taken,” she says.

“[And] we’d love lenders to consider more complex ownership structures, such as trusts and ownership in a trading company.”

Browne says: “I genuinely don’t think lenders should charge more to lend to a limited company than they do to an individual. If under- written robustly and the legal charge is registered correctly, there is no greater risk to the lender.

“I would also like to see lenders really embrace the green proposition and drive it, encouraging and helping landlords to make meaningful changes to their properties.

“Of course, the Minimum Energy Efficiency Standard regulations will do this anyway, but wouldn’t it be wonderful if lenders really championed their borrowers to help make the changes? For example — offering a free valuation of your property to show you how to bring up the Energy Performance Certificate rating. That would be real leadership in this space.”

We’d love lenders to consider more complex ownership structures

Syms concludes: “I think we’ll see innovations in service and process. It’s difficult for a broker to manage expectations when things take so long to go through. One example is Shawbrook, which has separated its complex and more straightforward BTL lending to make for a much more streamlined process.”

She also points to the integration of Open Banking but concedes that “this will take a lot of time and investment”.