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Landlords are diversifying their portfolios in search for greater yields

Around 51 per cent of UK brokers have been approached by landlords looking to diversify their portfolios in the last six months, according to new research from OneSavings Bank.

And 56 per cent of enquiries were about diversifying into Houses with Multiple Occupants (HMOs), which can generate a higher yield for landlords despite new regulations set for October.

The findings echo last week’s ‘Emerging Landlord’ report from Simple Landlords Insurance, which found that landlords were becoming younger, better informed, with more expansive and diverse portfolios. 43% of HMO landlords are in buying mode, with flats and holiday lets also areas of growth.

According to OneSavings, landlords are also increasingly diversifying into commercial and semi-commercial properties after the Prudential Regulation Authority (PRA) introduced stricter underwriting standards for portfolio landlords with four or more properties and the changes to tax treatments for buy-to-let properties.

The research found 14 per cent of brokers said they had been approached by landlords wanting to increase the level of commercial property within their portfolio.

In addition, 9 per cent reported that landlords wanted to diversify into mixed-use properties. Unlike residential buy-to-let property, landlords holding only commercial property will not be affected by the reforms to mortgage tax relief.

Another six per cent of brokers said landlords were looking to diversify into student accommodation.
Adrian Moloney, sales director at OneSavings Bank, said: “Landlords are on the hunt for greater yields, and, in the face of regulatory and tax changes, diversifying into commercial property or more complex residential options such as HMOs can offer this.

“With the buy-to-let market becoming increasingly complex, there is an opportunity for informed brokers to support landlords seeking new niches.

“However, these brokers must in turn be supported by specialist lenders who can offer the flexible lending needed to finance the growth of these segments of the market.”

Likewise, insurance products will need to adapt to support changing investment strategies. Tom Cooper, Director of Underwriting at Simple, added: “We want to be able to support the emerging community on aspiring and professional landlords to grow their portfolios and profits with our back-up. We can be the safety net that lets landlords grow, diversify and thrive.”

Source: Simple Landlords Insurance

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Portfolio landlords find it harder to secure mortgage finance post PRA rules

Seven out of ten portfolio landlords have found it more difficult to secure a mortgage since changes were introduced by the Prudential Regulatory Authority (PRA).

According to figures from Foundation Home Loans, based on research by BDRC Continental, 70% of UK landlords with four or more buy-to-let mortgages said they had found obtaining finance a challenge since the regulation came into effect on 30 September 2017. Half (51%) owning between one and three buy-to-let mortgages felt the same.

All the figures are based on feedback from 817 landlords that have applied for a mortgage or remortgage since the changes came into effect.

The PRA regulation means lenders must introduce changes to the way in which buy-to-let mortgage applications are underwritten for portfolio landlords. Borrowers with four or more mortgaged properties will be classified as portfolio landlords and subject to the new standards, such as a requirement to submit a forward-looking business plan.

As a result, almost half (48%) of landlords aware of the PRA changes think they will slow down the process of securing a mortgage.

Two thirds of those who own 11 or more properties believe the range of mortgage products available to them will be reduced. Furthermore, 28% believe the changes will make it more likely for their mortgage application to be rejected.

Jeff Knight, marketing director at Foundation Home Loans, said“Whether these figures are to do with a natural period of adjustment or become the new norm remains to be seen. Nonetheless, in order to make this as smooth a transition as possible, brokers and lenders must work together to ensure things do not become unnecessarily challenging.

“Our research last year proved that, at the end of the day, brokers and landlords are after pragmatic and straight forward processes. Considering the significant take-up from this group, we devised a proposition to make application as simple as possible – for example, with no need for evidence of a business plan.”

Source: Mortgage Finance Gazette