Photo by Skaus Haus

So here we are in 2024 already!  And it’s been a busy start to the year… I mentioned at the end of last year that I thought the specialist lenders may start to reduce their rates this year, but I have to say I didn’t expect it to happen quite so quickly. Shawbrook have started the year off by reducing their rates quite significantly, as well as relaxing some of their criteria, so I thought I would run you through what the changes are.

As anyone who has spoken to me knows, I am a big fan of Shawbrook – particularly for HMOs.  They offer commercial valuations for smaller (5 and 6 bedroom) HMOs, offer discounts for existing clients, and have a great bridge to term offering.  They are also the first lender to reduce their rates within this area of the market.

So, what has changed?

First off, we have some special edition rates at 70% and 75% loan to value with an increased fee (5% instead of the standard 3%).  The usual caveats apply with this; you need to ensure you are happy with the overall gearing of your portfolio, and the additional interest cost over the full mortgage term.  It is an option for when cash flow is important, or rental coverage isn’t sufficient to get to 75% at the standard rate.

They also want loyalty…It is worth noting that as an existing client or when the property has an EPC of A-C, you will get a discount off this arrangement fee, so there are ways to bring it down and still take advantage of the lower rate.  They work concurrently, so you can get both reductions if eligible.

The other big change is around the experience required for small HMOs.  Until now we have struggled with the options available for first time landlords on HMOs, particularly where you need a commercial valuation to make it work.  Shawbrook used to need you to have owned a BTL for 12 months for their small HMO mortgage, but this has changed and first-time landlords are now acceptable. This is great news, particularly if you are looking to do the conversion yourself as their bridge to term option works so well.

Here is a recap of how that works:

• You can borrow up to 85% of the purchase price (and then you fund the works) for the bridge.
• You have a valuation carried out at the beginning which will give you the current value and the post works value. We then have the option to use the same valuer for the term mortgage so you have more certainty over what you can pull out at the end.
• The bridge and term are separate products, so you don’t need to use the term option with them. If you do, then there is a discount on your arrangement fee, as well as very little legals to move from one to the other, if at all.  This is a cost saving and also means that the whole process is much quicker, so you will get your funds about 4-6 weeks quicker than a standard remortgage.

As always, if you have any questions then please get in touch and we can arrange a call to have a chat about how we can help.

About the Author:

Ellie Broadhurst is a specialist mortgage broker working at Baya Financial in partnership with The HMO Roadmap. She works with HMO property investors throughout their journey, from clients starting on their first project through to experienced portfolio landlords and developers. Learn more about Ellie here.