AFI BTL entry will spark fee competition

Lea Karasavvas, managing director at Prolific Mortgage Finance, said: “A new player the size of Abbey could see a reduction in fees from other lenders to try and compete with their portfolio.

“We have seen over recent months that there is an appetite for buy-to-lets again and this return will certainly set the cat amongst the pigeons.

“My only concern would be whether Abbey are truly ready for the undoubted influx of applications they will receive."

Karasavvas said that AFI had always been a lender that offered a great level of service but this had deteriorated over recent months.

He said: “If this is rectified I would expect a very big first half in 2012 for Abbey and would expect to see them regain the market share that was lost in the early part of 2011.

“The competition is most welcome and signs of what I am sure will be a busier 2012 for buy-to-let.”

Meanwhile David Sheppard, managing director at London-based broker Perception Finance, said: “The mortgage market will welcome another lender to the buy-to-let sector.

“Not only will intermediaries be able to offer more choice for landlords but other lenders will be encouraged by this as it will allow this sector to grow with the fresh impetus this will provide.

“It is firstly good to see that Abbey are supposed to be coming in at 75% LTV. This immediately will put them in competition where they could have chosen to enter a bit lower to control the initial take up.”

Sheppard added that the main focus will be on the fee structure Abbey chooses for its products.

He said: “Obviously the interest rate charged will be of interest as if the fees are going to be fixed as opposed to a percentage of the loan, we can expect higher rates to counter this.

“A higher rate may not be a bad thing depending then on the rental cover needed. Launching a 75% product is honourable but if the rental assessment then excludes the majority of applications from proceeding at this loan to value then it will be in vain.

“It will also be interesting to see if, by entering this sector, Abbey looks at the rental cover needed for those applying for residential mortgages with background buy-to-lets as this can be an issue for some borrowers.”

Ray Boulger, senior technical director at John Charcol, said targeting the non-professional landlord put Santander in a similar camp as the majority of other lenders.

he said: “The key things will be what their maximum LTV is, how competitive their rates are and how is their fee structure based.

“It looks as if they’ll be on a fixed rate fee that will certainly be welcomed by brokers. It’s good to have choice in the market as there will be some clients would prefer to pay a bigger percentage fee for a lower pay rate."

Boulger added that the key challenge for Santander is how competitive they would be coming into the market.

He said: “I’m sure Abbey will be very conscious of not falling over. It’s much better to come in with a competitive enough rate to attract business and attention.

“They’ve had a long time to give it careful thought. If they find the initial pricing too high, they can always make it more competitive later on.

“The worst thing they could do would be to come in with very low rates and then be forced to pull out. We’ve seen lenders do that too often.

“Having another lender in that market is going to be hugely important. It’s the one sector which is clearly growing.”