At the beginning of 2020, Pepper Money announced the launch of our Limited Company Buy To Let range, designed for customers looking to purchase property under a limited company structure; whether they’re newly incorporated, already operating as a special purpose vehicle (SPV), or failing a high street lender’s credit score.

It’s safe to say it turned out to be an unusual year to launch; with lockdown sweeping the UK by the end of the first quarter in 2020, it’s no secret the Buy to Let landscape has changed a lot in the last 12 months.

However, now we’re more accustomed to our new ways of living; we have a clearer picture of the market and what’s to come. With the government’s temporary relief measures looking to come to an end in March 2021, in this post I’ll shed some light on how we’re paving the way to more lending stability in the specialist lending market.

The need for choice

To start, I should say that despite the changing landscape of the market as a whole and the individual challenges we’ve all faced, our Limited Company Buy to Let range has been well received by our intermediary partners.

There’s been high demand for the range and I’m sure the recent growth of the market plays a part in this too. There are now over 230,000 Limited Companies that have been set up in the UK for the purpose of property ownership. Hamptons International recently reported that the number of new SPVs set up last year could be up by 23% from the previous year.

This proves that there’s a growing need for more choice, which is important for customers moving forward, particularly in the aftermath of the pandemic.

The impact of COVID-19 on Buy to Let landlords

The private rental sector has been hit quite harshly during the pandemic, especially in those early months. According to recent BDRC research, over eight in 10 landlords have been negatively impacted and some have seen a reduction in rental income achieved during the period.

Beyond the obvious impact on a landlord’s cash flow, when rent isn’t received – whether they have one property or 20 – it can also stop them from remortgaging and/or purchasing further properties if their portfolio isn’t showing to be performing well enough when they approach a lender.

At Pepper Money, we’re able to help in this situation as we don’t expect background portfolios to pass an additional stress test in the same way we would for a property we’re lending on.

We assess the portfolio in its entirety. We can assist Buy to Let landlords who may have received reduced rent – or no rent at all – on one or more properties in their portfolio during the last 12 months, providing the others are performing well enough to  subsidise them. This couldn’t be facilitated with lenders who require all properties in the portfolio to individually self-finance.

Another issue affecting a growing number of landlords, due to loss of rent or reduced rent payments, is adverse credit. We’ve seen through our own research how common this is amongst the UK population.

It isn’t just residential mortgages that are required for those not fitting the mould of the mainstream lenders.

At Pepper, we underwrite landlords with the same credit criteria as our residential mortgages, so we’re often able to help where others can’t.  Capital raising to consolidate debt could increase this year as a result of income lost by landlords, and with Pepper Money, your landlord customers can raise up to maximum LTVs.

The impact of COVID-19 on brokers

The issues being faced by landlords in the current market raises challenges for brokers sourcing the best solution for their customers. The biggest of which is the varying qualifying criteria across the market. We’ve kept it simple and transparent at Pepper Money and are proud to be able to help these landlords where others can’t.

There’s talk of an expected increase in Buy to Let applications when the SDLT holiday comes to an end in March 2021 as there could be the potential for picking up one or two good deals on properties that didn’t get over the line in time. This will be interesting to watch and we’re ready to support intermediaries with any additional Buy to Let enquiries they may see.

We recommend keeping in touch with your landlord customers in the coming weeks. If they’re looking to take advantage of these properties but need to move quickly, Pepper Money’s market-leading speed of service could be a perfect fit for such an application!

Circumstances aside, we’re pleased to have launched our Limited Company Buy to Let product when we did, and to be able to help at a time when brokers and landlords needed diverse options. We’re now in the position of refreshing and updating our Buy to Let products and criteria to reach more customers in need of a specialist solution and continue to provide 5* service along the way with our speedy turnarounds and case ownership model.

If you have any cases you’d like to discuss, or simply to learn more about our BTL offering, contact our brilliant BDM team or find more information on our official LinkedIn and Twitter pages.