Nathan Reilly discusses the upcoming changes in the buy to let market and how advisers can help landlords prepare for them.
The buy to let sector has seen a number of changes in recent years. This has been a challenge for landlords, lenders and advisers alike during a period of adaptability, flexibility and resilience.
But with the Prudential Regulation Authority’s (PRA) second phase of new underwriting standards for buy to let lending coming into effect on 30th September, there is further in store for the sector. Some lenders are already making announcements regarding their approach to buy to let portfolio lending, which means landlords need to prepare now.
What exactly is changing?
In line with guidance set out by the PRA, from 30th September 2017 landlords who have four or more mortgaged buy to let rental properties will be considered as portfolio landlords by lenders. The PRA expects all firms that conduct lending to portfolio landlords to use a specialist underwriting process that takes into account complex borrowing scenarios.
This will require the entire portfolio to be underwritten when applying for a new buy to let mortgage, even if the other mortgages are with a different lender. Lenders will also be required to use additional affordability tests on portfolio landlords and will require additional documentation to support applications.
How can landlords get ready?
Specialist lenders, already experienced in using a similar underwriting approach, have been clarifying their stance and assessment criteria. Whilst a number of mainstream buy to let lenders have also started to confirm whether they will be supporting portfolio buy to let lending going forward.
It’s likely there will be more announcements over the coming weeks, but between now and 30th September, it’s vitally important landlord clients are aware of how the changes could impact their current or future plans.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Craig highlights the importance of reviewing circumstances with your clients and keeping in touch with policy reminders.
Some of the most successful protection companies regularly review client needs and circumstances. I firmly believe it is a very important part of the protection sales process.
Keeping in regular contact with your client is essential, because even though you may have sold them a protection policy that will safeguard them against worst case scenarios, how can you guarantee a client’s needs and circumstances haven’t changed?
Client protection needs can change quickly
Over the past several years I have attended five of my friends’ weddings. Since then, three of those couples have now had children. This is a perfect example of protection needs clearly changing in only a short amount of time. If they had taken out their original policy before getting married, their circumstances will now be markedly different.
Annual reminders of benefits for clients
As an adviser, how do you best keep in contact to review a client’s status? One effective way is to send out annual reminders of the additional benefits that the client’s protection policy has. This might include Best Doctors Global Treatment® with AIG Life and Aviva, LV’s Doctor’s Services and Royal London’s Helping Hand.
Many of the firms I have met with in the past have provided these annual reminders as a matter of course. It serves as a reminder of the advice you delivered, keeps you relevant to your client, whilst also supporting the prevention of policy clawback.
Regular client catch-ups
Another tip is to schedule the client in for a catch up in 12 months’ time, whether a face to face meeting or simply a quick chat on the phone. This may of course lead to nothing, but nevertheless a regular check on their circumstances is very important.
As an example of how important this is, I recently put my house up for sale and within a week I received a call from my current lender highlighting the benefits of remortgaging with them directly. I hadn’t even spoken to my financial adviser yet, which shows the importance of remaining top of your client’s list when it comes to big financial decisions such as a remortgage.
Building a solution with your client
Your clients’ circumstances regularly change. They may have previously taken just life cover, but could they now add some critical illness? Some protection writers I have spoken to find that a client generally settles down a couple of years after the initial policy, at which point they often have a greater budget for protection.
If you are a member of our protection panel, the “indicative cost” and “matrix” tools on Solution Builder can make this really easy for you, especially when working to a budget. Equally, if the client has previously said no to the protection sale altogether, something might have changed in their lives to make them re consider.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.