01 April 2024

How technology is changing the buy-to-let market

By Joel Vinnicombe, Head of Product at Landbay

Technology and innovation are transforming buy-to-let lending into a more efficient, transparent, and customer-focused process. Whether lenders, brokers, or landlords, this is good news. Technology integration means lenders build and sustain partnerships with brokers and borrowers based on quick decisions, fast turnarounds, and constant dialogue.

Lenders are integrating technology into their operations with good effect. A good example is the evolution of the broker portal. While most lenders use third party technology firms to supply their broker portals, some are building their own portals in-house, including Landbay. Because an in-house portal allows lenders to be independent, it sidesteps the need to queue up for systems changes behind other lenders using the same technology firm.

Before launching our broker portal in May 2022, we spent 20 months designing, user-testing, and building it. The result is a fast and intuitive system that brokers find easy to use. Another significant benefit is that we now control the broker/applicant user journey.

Our portal, for example, provides streamlined form-filling and fast decisions as it determines which mortgage product is best for a broker's client. The application form leads the broker to the most appropriate product path by asking only relevant questions about their client's requirements. The portal automatically saves each answer as the broker completes the form and runs an entire eligibility decision under 200 milliseconds after each answer. This tells the broker which products are still eligible and details why a product is unavailable.

Having an in-house portal allows the quick launch of new products. We can also tweak criteria, make changes and add new functionality when we want or when it is best for the market. In addition, we can quickly react to market conditions and instantly respond to broker and market feedback. This ability to move fast has been invaluable during recent turbulent times.

Many mainstream lenders have integrated automated valuation models and specific AVM products into their portfolios to pursue greater efficiencies in the lending process. An AVM is a valuation that combines mathematical or statistical modelling with databases of existing properties and transactions to calculate property and rental values. It is most effective when similar properties are nearby and can be used as the basis for comparable evidence.

This year, Landbay became the first dedicated buy-to-let lender to integrate AVMs to speed up offer times significantly. Before our whole market launch, we ran an extensive pilot which found that AVMs speed up the time to offer and are, on average, three times faster than a standard application. In some cases during the pilot, we could issue an offer within 24 hours from the Decision in Principle.

We also found that using an AVM helps applicants save on average, £500 as they do not have to pay valuation fees. In our trial, one client saved nearly £4,000 in valuation fees on their portfolio. This is a considerable saving, given the pressures facing landlords in the current climate.

A contributing factor to achieving these results is the integration with a broker portal, which helps to streamline the application process. Brokers are advised to pick an AVM product at the outset. During the decision in principle, the system will run policy and product rules in real-time and flag as soon as possible if an application is unsuitable. If the application doesn't qualify for an AVM product, it can be swapped over to an equivalent standard product without starting again.

AVMs are not a magic cure-all solution, and there will always be a place for physical valuations, especially for non-standard, unique properties. But where and when the circumstances are right, AVMs can offer real efficiencies for lenders, brokers, and their landlord clients. When timing can make or break, this is critical.

The 'Mortgages-as-a-Service' marketplace funding model is another significant technological development in the industry. This allows for a more streamlined and efficient approach to mortgage investment for financial institutions, all while providing brokers and borrowers with an expanded suite of products.

MaaS involves partnering with multiple institutional investors who provide the capital to fund mortgages. This enables institutional investors to define their desired risk and return parameters, with products allocated to funders that align with their criteria. This benefits investors and borrowers, as a diverse pool of investors on the lender's platform leads to an expanded product range catering to various niche markets, such as buy-to-let mortgages for limited company borrowers.

Technology's continuing evolution and integration are essential to supporting the growth of both brokers and borrowers and ensuring that the buy-to-let market prospers. Buy-to-let thrives when lenders are prepared to innovate.

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.