The Intermediary – September 2025 - Flipbook - Page 38
BUY-TO-LET
In focus
From challenge
to opportunity
A
ffordability remains
one of the toughest
challenges in the
buy-to-let (BTL)
market. Rising costs,
regulatory pressures
and shiing tenant expectations are
forcing landlords to think differently
about how they fund and manage
their portfolios.
For brokers, that means finding
lenders that can adapt quickly to
change and provide solutions that
reflect the realities of today’s market.
I have seen first-hand how landlord
needs have evolved. Most landlords
we work with aren’t just chasing the
lowest rate. Although costs are key,
they want to know how much capital
they can raise to reinvest in their next
opportunity. The ability to access
more leverage is oen the difference
between standing still and growing
a portfolio.
That’s why Redwood’s recent
changes to affordability assessments
have been very well received by
brokers and customers, particularly in
the South East where affordability and
yields have been more challenging.
Lenders have a role to play
in reviewing how they assess
affordability regularly. Traditional
approaches can hold landlords back.
If lenders look more closely at rental
income and strip out unnecessary
deductions, as Redwood has done,
that can unlock higher loan amounts
and allow landlords to release more
equity, and in turn beer investment
opportunities.
More lenders are reviewing their
fee structures, terms and challenging
stress rates alongside their credit
risk modelling to help landlords
meet affordability hurdles while
remaining prudent.
As an example, differing fee
structures such as a higher fee for
a lower interest-rate product can
help landlords pass stress tests more
comfortably, unlocking more capital.
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The Intermediary | September 2025
For brokers, keeping pace with
these changes is essential. Clients are
increasingly expecting their advisers
to know which lenders are most
flexible on affordability and which
can offer streamlined processes and
quicker decisions back with certainty.
Speed and simplicity are critical,
which is why Redwood has reduced
the amount of information required
to complete an approved application in
another positive step.
A broker doesn’t want to spend time
pulling together documents that a
lender doesn’t actually need. If lenders
can simplify applications and carry
out more effective checks up front, it
gives everyone greater certainty and
saves time.
Refreshingly flexible
I recall a case where a landlord was
refinancing two semi-commercial
properties with retail units below
and residential conversions above.
Under older affordability models,
the loan would have been capped at
a lower level due to the debt service
cover requirements. Redwood’s
refreshed proposition, aimed at
boosting affordability, meant it
was able to increase the loan by
around 16%, enabling the landlord
to not only refinance the cost of the
refurbishments undertaken, but to
purchase another investment property
on the same street. That shows the
importance of lenders listening to
brokers and being willing to adjust
policy when the market demands it,
and continue to do so.
One of the strongest trends I
have observed is diversification.
Landlords who once focused purely
on residential buy-to-let are now
exploring semi-commercial and
commercial property.
This diversification isn’t just about
returns. It is also about spreading
risk. With interest rates higher
than landlords have been used to,
and Government measures aimed at
MARK DOBSON
is head of business
development (South and
London) at Redwood Bank
improving tenant protections, many
investors are seeking to invest in
assets that offer stability and reduced
tenancy turnover.
A property let on a long lease, for
example to a housing association
or care provider, can deliver more
predictable income than a series of
short assured shorthold tenancies
(ASTs). That long-term certainty is
appealing at a time when costs are
more unpredictable and regulations
are tightening.
The future of the sector will depend
on how landlords respond to further
changes in tax and regulation, such
as the Renters’ Rights Bill. Talk
of National Insurance (NI) being
applied to rental income is already
on the horizon, adding another layer
of cost to consider. We have seen a
lot more focus and aention from
landlords on energy efficiency and
Energy Performance Certificate (EPC)
requirements, with more customers
now qualifying for cashback
under Redwood’s Green Reward
cashback product.
Lenders must stay agile. We always
encourage landlords to factor in the
true costs of running their portfolio –
whether that’s management charges,
maintenance and repairs or potential
tax changes. The best lenders are those
who evolve their affordability models
in step with the market, not years
behind it.
For brokers, the message is clear.
In a tougher environment, lender
choice maers more than ever. Those
that can demonstrate flexibility on
affordability and deliver smoother
processes will be the ones who help
landlords keep moving forward. ●
