The Intermediary – March 2025 - Flipbook - Page 40
I N T E RV I E W
“pretty unique for a non-bank lender,” and its
first-time landlord offering.
Keep the market moving
There were a number of reasons Quantum
Mortgages chose to start opening its doors to
more first-time landlords.
One was the sheer level of demand from
brokers, which made it clear to Neale that
the firm was potentially turning away good
business. Beyond this, first-time landlords are
an important part of the private rented sector
(PRS) ecosystem, and offering them support
– particularly where the high street might not
– is key to keeping the wider property market
moving and healthy.
When it comes to this cohort of clients,
Neale says, it “comes down to property types.”
He adds: “There is still a demand for people
investing in UK property. Professional landlords
have moved away into higher yield property
types, and they don’t tend to buy small single
unit flats or houses any more, because the
rental yields just don’t work for them.
“However, the PRS is really important to the
UK – it’s been around 20% of the UK housing
stock since the early 2000s. As professional
landlords move away from the single use
property, that can reduce the supply of more
affordable rental homes. First-time landlords
are more agreeable to this type of property.”
Quantum can be flexible on property types
– even pushing the envelope to allow them
to consider houses in multiple occupation
(HMOs) and multi-unit blocks (MUBs) – while
remaining more conservative in comparison to
its larger portfolio landlord clients.
This, Neale adds, is where the specialist
lender’s ability to look at all aspects of a deal
comes in, allowing for an ad hoc approach, and
creating a pathway into the market for a muchneeded influx of new landlords.
Changing buy-to-let
Whether looking back to 2017 and the changes
to taxation rules, or through to more recent
developments in this Government’s first
Budget, there is constant change in BTL.
Even when those first changes came in,
Neale says, “life was relatively simple,” with
landlords simply pivoting to special purpose
vehicles (SPVs), and circumstances remaining
relatively straightforward.
While the market rapidly shifts, taxation
changes “really start to bite” and the cost of
funding rises, the average landlord has also
had to evolve at pace and “find more ingenious
ways to extract value out of their property.”
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The Intermediary | March 2025
Neale describes professional landlords as
being a robust, adaptable cohort with their
sights set on the long-term. He also believes
that, while rental reform will shake things up,
most good landlords are already doing much
of what is being covered, or are at least on the
same page of wanting to ensure high standards
in the market and freedom for tenants.
More than anything, these changes, as
well as those announced in the Budget, are
fuelling an existing shift in terms of property
preferences.
Neale says: “The continued pursuit of yield
is the key driver for professional landlords.
The past few years have driven them towards
HMOs and MUBs, but it doesn’t stop there.”
Landlords continue to evolve, and for the
specialist market this means semi-commercial,
and even bringing fully commercial properties
into their portfolios.
“It’s often not enough to buy an HMO,” says
Neale. “Landlords are buying and converting
large single unit properties, splitting freeholds,
selling off separate leases – a very complex
transaction – and we’re seeing a huge growth
in semi-commercial over the past 18 months.
Then, over a short period – maybe six to 12
months – we’ve started to see more fully
commercial properties in our borrowers’
portfolios. Commercial is a riskier investment
and the financing cost is therefore higher, but
the yield is so much greater than residential.”
Quantum Mortgages also recently gained
approval from the Financial Conduct Authority
(FCA) for regulated consumer buy-to-let,
making it one of a finite number of lenders with
space to grow in “quite a big market in need
of support.”
Death of the market
Overall, the specialist BTL market is seeing not
the mass exodus that many headlines have
warned of over the years, but a shift in the
types of landlords and the structures of their
portfolios. Neale concedes that the number
of new landlords entering the market is below
that of those exiting, but explains that those
leaving tend to be at the more amateur, ‘dinner
party’ end of the scale, as the margins simply
are not there to keep them engaged.
In addition, Quantum is seeing a high number
of purchase applications, suggesting that while
the number of landlords overall is decreasing,
the market is becoming more “complex and
professional,” with properties spread between
fewer, larger portfolio landlords.
Neale adds: “Ultimately, if we can see
another 1% off interest rates, single unit
