The past few months have been particularly buoyant for the commercial mortgage market as hurdles elsewhere have driven more and more landlords to diversify into the sector for the first time, or increase their existing commercial property holdings.
In particular, last year’s 3% hike in stamp duty, together with the more recent changes to mortgage tax relief for buy-to-let landlords, have acted as a catalyst for those considering a portfolio change.
As would be expected, many landlords chose to mitigate the impact of the changes by operating through limited companies, especially for new purchases. This behavioural change has thrust specialist lending into the mainstream for many brokers and their clients.
In the wake of the changes – and with the increasing professionalisation of the buy-to-let market – we’ve seen more and more landlords, especially those with larger portfolios that are seeking to protect yields, consider commercial property investment. Many of the landlords moving from residential to commercial or semi-commercial properties are being lured by what are traditionally higher yields, or indeed to the wider options available on finance.
Costs are also a major factor. The recent changes to tax relief have driven over a third of landlords to cut their annual spend, with maintenance and letting fees identified in the latest research as the main areas of cost cutting. As landlords come to terms with rising costs, many are looking to the commercial property market where overheads take on a markedly different shape due to the differences in tax treatment between buy-to-let and commercial property income.
Amid all this change, brokers are perfectly poised to help landlords leverage what are potentially very attractive alternatives to the property types they may be used to. The commercial lending space can present some exceptionally complex cases, but complexity needn’t be a deterrent. If the rise of specialist lending has taught us one thing, it’s that innovative solutions from lenders can help cut through the confusion and make complex cases far less complicated.
Brokers who face up to the changing tides now – and familiarise themselves with all the options available – are far more likely to prosper as the market evolves. Our own strategy at InterBay – and the wider OneSavings Bank family – has been to put brokers at the heart of our operation. Brokers are our business, and we know that it’s only by building strong working relationships with this community that we will collectively be able to serve the widening range of borrower needs.
Over the past year, we have grown our distribution model to answer a groundswell of demand, putting an emphasis on face-to-face relationships and expanding our underwriting team. We’ve found that having constant lines of communication open with brokers has been critical to our success, this has allowed us to develop an offering for specialist commercial propositions that the high street has simply not been able to address.
At InterBay, we believe it’s crucial that we can provide products that address the numerous challenges associated with commercial lending and have developed a range of loans for both residential and commercial investment property, and indeed where a property includes both, for example where an HMO or a buy-to-let is above retail premises.
Our outlook for the commercial market has changed dramatically over the past 12 months, and InterBay now finds itself riding a wave of demand at the forefront of a rapidly changing market. The challenge now is to ensure that brokers and landlords are along for the ride together.
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