As a broker, what might you find if you looked inside the mind of one of your buy to let landlord clients? Concern about rising interest rates and tenant affordability? Worry that the government might introduce harsher taxes? Confusion or even anger about the potential changes to Energy Performance Certificate requirements and how much efficiency improvements might cost? Or might their preoccupations be entirely different? How closely aligned are landlord mindsets and those of the brokers advising them?
As a significant buy to let lender (OSB Group is comprised of Precise Mortgages, Kent Reliance for Intermediaries and InterBay) looking at the future of the sector from numerous angles, including through an ESG lens, we thought it made sense to find out. So, we carried out an extensive piece of research in Summer 2022 to ascertain what buy to let investors are really thinking about and what they are planning.
We interviewed more than 1,000 landlords and more than 200 brokers. The results of this Landlord Leaders survey were more varied, more complex – and a lot more positive – than we had expected, and will help shape our lending strategy into 2023 and beyond.
It's definitely worth reading the whole report, but here are some of the salient points.
The first theme to emerge was the gap between professional landlords with four or more properties and the part-time investors, with the professional landlords feeling positive and dynamic about their buy to let investments: 80% had recently purchased or were planning to buy more property.
These landlords were also far more concerned with energy-efficiency than lenders or brokers might have anticipated. Some 40% said they had already made environmentally-friendly upgrades to their property and 35% planned to do so in future. Interestingly, of those brokers surveyed who advise professional landlords, only 18% said their clients were updating their properties already, and 60% said any improvement plans were on hold until legislative changes to EPC requirements become clear.
When asked about their motivation for investing, 39% of professional landlords were primarily spurred on by earning potential, and 28% valued investing in a fixed asset, as you might expect. But having a positive impact on tenants’ lives was cited as important for 29%, as were providing housing for those who need it most (29%) and playing a role in the local community (22%). Those brokers surveyed did not point to social motivators as key for their clients. Having a positive impact on tenants’ lives was only identified by 2%; providing a house for those who need it by 2% and playing an active role in the community by 1%.
Why should any of this matter to brokers? In a transactional relationship, it probably doesn’t. If your role is simply to find the best deal for a customer at a fixed point in time, you don’t need to know what is in their mind, let alone their heart.
But mortgage brokers don’t view their relationships with their customers as transactional. The same buy to let landlord will come back to you time and again for advice and direction, particularly in a challenging economic environment and where environmental issues (and potentially legislation) mean they may require different financial solutions through the varying stages of their investment. The Landlord Leaders research suggests there are new conversations to be had between brokers and landlords, and potentially a longer, greener path to walk together, with the support of engaged lenders like OSB Group. Maybe it’s time for a different conversation.
This article first appeared in The Intermediary.