Around 63% of brokers have reported increased demand for specialist buy-to-let (BTL) deals, especially for limited company products, but lenders are still cautious, a report says.
According to Finova’s New Foundations: Building the next era of BTL lending, which surveyed around 200 UK mortgage brokers and 100 UK mortgage lenders, around three-quarters of brokers are reporting a surge in demand for limited company BTL deals.
Hamptons figures from earlier this year show that the number of BTL companies sits at over 400,000, which is the first time the 400,000 mark has been exceeded.
However, despite brokers reporting growing demand for more specialist BTL business, 41% said broker demand was the main barrier to innovation, with 45% pointing to regulatory constraints.
Looking at specialist lenders, nearly two-thirds said a lack of broker demand was holding back innovation, which Finova said shows a “mismatch between demand in the market and what lenders are offering”.
Criteria Brain figures show that of the 79 lenders listed under limited company BTL, around 51 said they will accept such business.
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More than a third said technology was also a barrier to product innovation, with many lenders struggling with legacy systems, which can slow product development or limit their ability to respond quickly to borrower demand.
Around 36% said evolving swap rates were the biggest barrier, with 35% pointing to margin pressures or lower affordability. Finova said this shows the challenges of “balancing competitive pricing with viable returns”.
Approximately 78% of lenders – going up to 83% of building societies – said the appetite for innovation is stronger than two years ago.
However, 15% of lenders are prioritising investing in entirely new product types and 11% are focusing on faster decisioning engines, which Finova says could mean opportunities for investment are being missed.
Looking at investment, 21% of lenders are channelling investment into broker portals and communication tools.
However, 48% of brokers want investment to focus on flexibility for complex borrowers and 43% want an improvement in the speed of service.
Investment in products ‘the market is craving’ is key
Gareth Richardson, Finova’s CEO, said: “We’re seeing a real shift in the specialist BTL market, with brokers responding quickly to growing investor demand. However, the flip side is that many lenders are still playing catch-up.
“The gap isn’t a lack of ambition, it’s where investment is being directed. Many lenders are focusing on broker portals and other support tools, but the real opportunity lies in investing in the products the market is craving, like specialist BTL, and in the technology needed to accelerate service and product development. There’s huge potential here, and those who can adapt quickly and with confidence will be the ones leading in specialist BTL.”
Hamza Behzad, business development director at Finova, added: “The specialist BTL market is full of opportunity, fuelled by strong broker and borrower demand, particularly across limited company, green, and commercial BTL. Right now, lenders risk being left behind if they don’t evolve.
“Brokers are looking for faster, more flexible lending solutions that can meet complex borrower needs. The challenge for lenders is bridging that gap and the right technology is key. By moving beyond legacy systems and investing in agile origination platforms, lenders can not only keep pace with broker demand but stay ahead of it.”
