MT Finance brings its ‘bridging DNA’ to BTL market

MT Finance has rolled out its BTL proposition following a trial of several months. The firm’s head of lending for BTL, Marylen Edwards, talks about what drove the bridging lender to enter this space

Back in July 2022, MT Finance made waves with its entry into the BTL market after securing a forward flow investment from JP Morgan, and recruiting Marylen to develop and implement the proposition and underwriting practices. At first glance, the decision to enter a saturated market seems counterintuitive, but Marylen explains it is a natural progression for MT Finance. “We wanted to offer longer-term funding and potential exit strategies for our bridging clients,” she shares, adding that this decision was based also on the demand for BTL finance from its broker partners. “While there are a lot of BTL lenders, I think there’s always room for one more, and there was a gap available to mirror MT Finance’s bridging DNA in this market.”

The company has a mindset to offer a “service with a difference”, and the BTL team carried out extensive research to mould the proposition and soft launched the range last summer to a number of brokers with whom MT Finance have long-standing relationships. “We did really well during the soft launch; we had a lot of business in the first six weeks and the feedback was really good. As the word started to spread, more brokers wanted to test it out, so we added a few more towards the end of August,” Marylen elaborates.

However, the mini-Budget threw a spanner in the works when it came to the full launch, so MT Finance chose to extend the trial period for a few months— officially opening it to the wider market in late March. “From the end of October last year until January 2023, the BTL sector almost stood still, as people took a little step back to see what was going to happen. But, since interest and swap rates started stabilising somewhat at the beginning of this year, we’ve seen activity grow week on week, which is why we decided to open the BTL range to the whole of market.”

The offering provides several options for standard residential, semicommercial and HMOs/MUFBs, with applications accepted from individuals, companies, first-time buyers and landlords, and those with adverse credit.

The standard residential products offer loans of between £25,001 and £2m at up to 80% LTV for units from 28 sqm, including holiday lets. The range comprises two- and five-year fixed-rate options, available for lending against houses, leasehold flats, maisonettes and new build dwellings. For semi-commercial properties, there are two five-year fixed-rate products with a 2% and 5% fee respectively, both available at up to 75% LTV.

Meanwhile, the lender’s HMO and MUFB product ranges provide loans of up to £1.5m (subject to LTV limits), with multiple options for small HMOs (up to six bedrooms), large HMOs (6-10 bedrooms), small MUFBs (up to four units) and large MUFBs (4-10 units). The small HMO and MUFB offerings include two- and five-year fixes, the majority of which are available at maximum 75% LTV. Meanwhile, the large property types can obtain only five-year fixes at up to 75% LTV—the large HMO range also includes some 65% LTV options.

According to Marylen, the BTL proposition has several USPs, chief of which is a personal, streamlined service, based on her 10 years of experience as a broker. “Service delivery is something we’ve carried forward from the bridging side, including the ability to look at things quickly, not ask for unnecessary information, complete deals as soon as we can, and keep brokers informed so they know where they stand.”

In terms of lending criteria, Marylen says the lender’s stress testing on fiveyear fixes stands out in the sector, as the ICR is set at 125% for all tax brackets. “We will also look at 28 sqm, while the market consensus tends to be 30 sqm as the minimum size for an individual BTL unit,” she adds. On top of this, MT Finance will consider loans for specialist properties, including holiday and shortterm lets, HMOs and MUFBs, some serviced apartments and first-time landlords, as well as complex deals.

“Serviced apartments are an anomaly for lenders, purely because most were purpose built for this use and so could never be used as long-term lets—we won’t lend on these. However, many landlords have taken regular properties that don’t have this caveat, so they can run and manage them as short-term lets but, in the event of a change in market demand, they could let them on a standard BTL. We lend for these types of properties based on what they would achieve as a standard AST.”

Following the launch, Marylen says the company has received positive feedback from intermediaries, brought more brokers on board, and seen an increase in BTL enquiries. “It’s still early days... plus, the changes in swap and interest rates at the beginning of April meant we had to increase our pricing that week, so we’ve had a lot more applications [before these changes],” she explains. The rise in holiday lets

Given that staycations have been popular of late, I was curious to find out whether the business is expecting to see continuing requests for holiday let loans. Marylen anticipates an even demand for all types of BTL cases, noting that landlords generally look for holiday let opportunities in the spring and autumn. “Landlords don’t look at short-term lets during the seasons, because one would have to buy them at a premium during the summer. Plus they’d be losing that season—buying ahead gives them time to market them through a management company so they’ll have bookings for the next holiday period. It’s towards September/October that you’ll maybe see holiday lets come up for sale, or people buying places they know they can convert into holiday lets as they’d have seen the demand for these themselves,” she elaborates.

While holiday rentals in cities and coastal towns remain popular, Marylen highlights that demand has spread throughout the country, partly because of property use restrictions in some holiday let hotspots. “A lot of specialist lenders that provide finance for holiday lets lend on what a standard AST would achieve. For properties used purely as holiday lets for the entire year [as per a landlord’s choice], or in areas where holiday lets have to be used as such, rather than seasonal—like Cornwall—then you’re looking at a more commercial approach; it’s usually commercial lenders or building societies that will look at these and treat them as a commercial business, rather than a specialist BTL. Using Cornwall as an example again, a lot of the old cottages are made of mundic concrete, which a lot of lenders won’t touch,” she explains, adding that some cities have fewer restrictions. “Bournemouth and similar towns and cities are a landlord’s dream as you can rent a property to students from September until June, then rent it as a holiday let for three months before students come back. It’s the best of both worlds.”

MT Finance finds landlords look for properties in places they are based in or know well, as well as where they see demand. “It comes down to how comfortable they are with [the area], and also whether they can use the property as a regular BTL and/or an Airbnb, for example, throughout the year—it’s all about landlords being more savvy as to what works.”

Marylen expects holiday lets to remain popular as they can offer an attractive investment opportunity and a reliable income. “Staycations seem to be as popular as ever with no sign of abating, despite our ability to now travel abroad. In terms of trends, there still seems to be a focus on city breaks, the coast, and areas of outstanding natural beauty—and I don’t see that changing any time soon. However, landlords do need to do their research on the area and look into any usage restrictions that may be in place.”

For now, the company is focused on establishing itself within the BTL sector. “It’s baby steps. We’ve still got this proposition to get off the ground and become massively successful before we start looking at anything else. In 2023 and going into 2024, we will lay the foundation, grow the business, and nurture and maintain relationships. However, there are a couple of new things that are being talked about—so watch this space.”