1. L&G Mortgage Club BTL changes and their impact – lender perspective
Kevin Purvey – Director of Intermediaries
November 2017

2. Agenda
Journey so far
Right here – right now
What next

3. BTL gross lending

4. Distribution of PRS portfolio size-landlord/dwelling weighted
62% of landlords only own one property representing 28% of PRS dwellings
7% of landlords owned five or more dwellings but they accounted for 38% of the stock

5. Journey so far
Stamp Duty Land Tax -From April 2016 additional 3% stamp duty payable for BTL and second property
PRA - supervisory statement introduces minimum standards inc. ICR and stress tests from 1/1/17
BTL mortgage interest tax relief - Effective April 2017 tax relief will be restricted to basic rate and phased in over a 4 year period
PRA - supervisory statement SS13/16 introduces more stringent underwriting rules for portfolio landlords in October 2017
Wear & Tear -10% allowance abolished from April 2016
Capital Gains Tax - April 2016 an 8% surcharged was applied
FPC – FPC have powers of direction over ICR’s and LTV’s

6. No sign of a car crash!

7. New Rules – New Opportunities Differing ICR calculations
Lender’s general approach
10 + properties
4 - 10
3 or less
Portfolio/Commercial Underwriting
BAU including SPV
Full market offering
Use of technology for large portfolios
Specialist lenders & brokers
Portfolio Underwriting
Evolution of proposition
Lenders Exited
BAU
- criteria & price
Proportionate approach to the new rules
Lenders taking a segmented approach
Price driven
New Rules – New Opportunities
Differing ICR calculations
Product Transfers
Transitional Rules
Tax advice

8. ENGAGEMENT client / broker / lender
What does the future hold?
Landlord Reaction – Unknown reaction by landlords to impending tax relief changes
Lender innovation - will continue to address gaps in the market and support intermediaries who remain critical to this segment
Product transfers - options have increased as more lenders have entered this market
Minimum energy efficiency standards - to be implemented 1st April Any private domestic property with an EPC rating of F or G will be considered sub-standard
More use of transitional rules - provision within the PRA supervisory statement to protect existing BTL customers
Basel Committee - is still deliberating on the capital that lenders need to hold for BTL mortgages.
Ltd Co / SPV - clearly an option for some moving forward but tax advice essential
ENGAGEMENT client / broker / lender

9. BTL Market resilient but some hurdles left to jump
Summary
BTL Market resilient but some hurdles left to jump
Lender interpretation of rules implemented on time
Level of documentation
Complex market & customer confusion
Choice & opportunity
Further product and criteria innovation
Closer lender/intermediary relationships