Buy to Let Specialist by Stealth
With apologies to the stars…
BTL Lending £ Billion 50 40 30
20
£44.6
£37.5
£27.2 10
£8.5
£10.4
£14.2
£16.4
£20.7
£43
£48
£27.4
0 2007
2008
2009
2010
2011
2012
2013
2014
Source: CML 2007-2015 | IMLA predictions 2016-2017
2015
2016
2017
Limited Company Lenders Lenders
12 Lenders offering products to Ltd Co’s 33 Lenders active in the BTL market
Products
Average of 147 products for Ltd Co’s Average of 914 products for individuals
Ltd Co BTL Activity SEP’15
OCT’15
NOV’15
DEC’15
JAN’16
FEB’16
24%
15%
31%
38%
43%
46%
Number of limited company applications as a percentage of all buy to let application activity at Mortgages for Business.
Ltd Co BTL Challenges • SPV or trading companies • SIC codes
• Floating charges & debentures • Underwriting skills • Lender technology
Incorporation & Advice •
Section 162 of the Companies Act
•
HMRC – SDLT exemption on case by case basis
•
Linked transactions
•
Impact of taxation: 3% SDLT surcharge & relief restrictions for higher rate tax payers
•
What are brokers doing? High level “hook-ups”
•
What are brokers doing? “Best practice”
What are brokers doing?
Future of Stress Tests • Industry standard - Up to 2015: 125% @ 5% - 2016: 125% @ 5.5%
• Impact of tax change (2020/2021) - Higher rate: 156% - Higher rate: 167%
Future of Stress Tests • Some movement on higher LTV stress tests • Some changes on profile/property types from - Paragon - Kent Reliance • Determining who will “retain” existing stress test
Data Set Analysis >£200m Av Loan
Yield
% of Data
Reduction at Stress Rate 125
156
167
<5 yrs
£181,250
6.2%
69%
3.8%
14.0%
17.9%
5 yrs
£237,802
5.9%
31%
8.0%
20.9%
25.1%
Combined
£195,703
6.1%
5.1%
16.2%
20.1%
Ltd Co percentage is 35% on 5 years and 31% overall No difference in average loan size in Ltd Co cf overall
Topics to Discuss / Vote •
Average stress test at 31December 2016? - 125% | 135% | 145% | >145%
•
How will the MPC interact with BTL market?
- LTV | RTI | Other elements •
Predict volume in 2016 (cf £38bn in 2015) - Same as 2015 (or slightly above - £43bn (IMLA) - Above £43bn
Thank you Any Questions? Thank you David Whittaker Tel: 01732 471601 Email:
[email protected]
