Specialist lending flies over the cuckoo’s nest

If the closing stages of 2020 were crazy, the start to 2021 has gone full blown One Flew Over the Cuckoo’s Nest. Activity levels have shot through the roof, and for a number of reasons.

On the one hand you have landlords continuing to manufacture value out of their portfolios, whether through change of use altogether (for example, multi-unit properties to HMOs) or modernisation and refitting.

It’s understandable why. For starters, margins are tighter than ever right now given the much harsher tax regime.

Landlords also have ever-intensifying competition from the growing number of PRS developments. These institutionally-backed schemes are forcing them to really raise the bar if they want to remain competitive with the new generation of more discriminating lifetime tenants.

The result? Refurbs — heavy, light and pretty much everywhere in between — are absolutely rampant.

But refurbs are only the start of it. You’ve also got a huge amount of development exit finance taking place right now.

Despite the stamp duty holiday, it can still be hard to dispose of units and developer exit loans are worth their weight in gold in the current environment. They don’t just come with lower rates but give developers much needed time and all-important wriggle room.

As for specialist buy-to-let, it’s gone bananas. There’s no other way to put it.

Yes, the Stamp Duty holiday has contributed to activity levels as landlords add to their porfolios at a discount, but the sharply increased conservatism of the high street banks at higher LTVs has seen many first time buyers priced out of the market. Demand for rental property is stronger than it has been for many years as a result.

At the same time, stricter stress testing on the high street is driving landlords into the arms of specialist lenders who can be much more flexible with their underwriting.

Here at Octane, for example, we don’t stress test our buy-to-let products at all, meaning one of the major challenges brokers and landlords are facing has been removed altogether.

On top of that, we’re also willing to lend to borrowers that the banks actively avoid, specifically first time landlords, foreign nationals, MUFBs (multi-unit freehold blocks), HMOs (houses in multiple occupation), limited companies and other non-standard structures.

Our buy-to-let loans, especially the 5-year term ones, are proving so popular right now that we’ve further widened the distribution, making some of the products available to the whole of market. With pay rates starting at 3.99%, why not check in with your usual point of contact at Octane and find out more?