Unlocking potential with UTB's BTL property lending

This article was created in partnership with United Trust Bank

With the costs of letting property increasing, driven mainly by higher mortgage interest rates, the more professional landlords have looked to diversify their portfolios and seek higher rental yields. Brokers who come to the table well-versed in non-standard property and more challenging borrower requirements or circumstances are going to have an edge — and those niche cases are something United Trust Bank happens to do incredibly well.

“We’re into a number of specialist areas that can help brokers with difficult cases,” said Barry Luhmann (pictured left), head of buy-to-let at United Trust Bank (UTB). “If you need a specialist lender because of the particular property, or the customer has unusual circumstances, or something else tricky to place, we can often help. Our criteria and pricing really hit that sweet spot in this market.”

Strong growth over doom and gloom

Despite some doom-and-gloom statistics — for example, people reference how the market was flying at £50 billion two years ago and it’s now down to about £30 billion, Luhmann noted — the rental market is here to stay. Rents have soared over the last few years, which is helping to restore affordability following the spike in interest rates and therefore bolster residential property as an investment. As landlords diversify, looking more at HMOs, MUBs, holiday lets, and semi-commercial properties, brokers are working with their customers to consider all options.

“While some landlords exited the market, or reduced their holding, many let properties have stayed in the private rental sector,” Luhmann said. “We know that most landlords are in it for the long game, with an eye on long-term returns.”

Caroline Mirakian (pictured right), sales & marketing director of UTB’s mortgage division, agreed, noting “there’s so much growth right now in the specialist buy-to-let market.”

“At the end of the day it’s about spotting the opportunity,” she added. “The private rental sector is vital to provide the mix of housing the UK needs and it’s also good business for landlords, brokers, and lenders.”

Brokers faced with difficult cases shouldn’t be disheartened — UTB is here to help. With a range of buy-to-let products for individual, portfolio, limited company, SPV, and first-time landlords, the lender is always open to discussing what might not “fit the box.” Remember it’s a spectrum: on one end are the specialist lenders who offer the cheapest rates but are maybe more vanilla in appetite, and on the other end there are those that have higher rates and will lend on almost any scenario.

“Brokers should think about UTB as being somewhere near the middle,” Luhmann said. “UTB does lots of property types that many other specialists will not and can often provide better rates for those tricky properties or circumstances.”

Luhmann’s bottom line for brokers?

“You just need to try us.”

What does UTB offer?

At UTB, non-standard property types are the bread and butter of the BTL team. This includes non-standard construction, HMOs up to 10 bedrooms, MUBs up to 10 units, and proximity of commercial — within reason and subject to valuation, “we can often lend regardless of what is next door or how close it is,” Luhmann noted.

Whether it’s a flat directly above a pub, a nightclub, or takeaway restaurant, UTB does really well on these. From the landlord perspective, a lower asset value (as it’s impacted by the commercial) but one that will generally rent well (clearly near amenities and often transport links) can provide a better yield than a traditional three-bed semi.

“If you’re going to talk about one thing that UTB is known for, it’s property types,” Luhmann said.

UTB also doesn’t shy away from high rises. While standard lenders don’t like to go above five or 10 storeys, UTB will accommodate all the way to 30 — or sometimes above — if the property is a good one. Block exposure is another differentiator. Most lenders tend to only finance two or three of a block of 10 due to the typical 25% or 30% exposure requirement. But UTB will go up to all 10 in a block of 10, allowing landlords to buy neighboring properties as they come up for sale should they so wish, with a maximum of 15 units for larger developments.

Another common scenario is when someone buys a large house, divides it into four flats with four leases, and approaches a lender to take out individual financing on the four units.

“For some lenders their 25% rule can cause problems but that’s where our flexibility works well, and we’ll finance all four,” Luhmann noted.

UTB’s other unique buy-to-let options include some on holiday lets. UTB stands out from the pack by using the actual rental income they’re earning as opposed to basing affordability on AST rent.

Another element of UTB’s underwriting that often helps is its +10% rent. If the customer can prove their passing rent, when this is higher than the independent valuer’s market rent, the lender will add up to 10% to the valuer’s market rent figure, which can make the difference between passing and failing ICR (Interest Cover Ratio).

For example, if the valuer says the rent is £900 in the open market but a customer declares they receive £1,000 per month and proves this with bank statements or a tenancy agreement, UTB will utilise a rent of £990.

“UTB takes into account that people have existing buy-to-lets that, for some reason or another, they’re able to rent slightly above the market average,” Luhmann said. “Our 10% rule is fairly unknown but has proved very useful to lots of brokers and their customers.”

Finally, the UK government has been keen to increase the quality of rental stock via EPC ratings. A few years ago, it became illegal to rent out anything graded F or G and more recently the government was thinking about extending that list to include D and E. UTB awaits the next development in this matter post the general election, but as it stands “that original move made more landlords look at new builds, which have higher EPCs and generally require less repairs,” Luhmann explained, adding “we’re finding them quite popular at the moment, particularly with novice landlords.”

Full speed ahead at UTB

Amid the buoyant rental market, Mirakian said UTB’s buy-to-let offerings are also experiencing phenomenal growth — and Luhmann wants to keep building on that momentum.

“It’s hard to shout about all our nuances and niches and all the good things we do, but we’re getting talked about more and we’re seeing lots of brokers register with us and return to us,” he said. “We’re strong in this space: we’re making our mark, and we’ll continue to do so. Our focus is on broker relationships and education so they know we’re here and are aware of what we can do.”