Research from Finova found that specialist buy-to-let (BTL) products gave lenders stronger margins and lower risk, but borrowers with complex needs were still being left behind.
Among lenders offering specialist BTL, one in five (22%) said holiday lets delivered the highest margins, with limited company BTL and houses in multiple occupation (HMOs) both at 20%, and commercial BTL at 15%.
44% of lenders said borrowers with complex needs were the most underserved group, ahead of first-time buyers (FTBs) at 39% and landlords at 34%.
Additionally, lenders said default risk was lower on limited company BTL (48%), HMOs (56%) and portfolio landlords (43%) compared to other types.
47% of brokers also said default risk on specialist BTL was low.
Lenders expected the strongest growth from HMOs and multi-unit blocks (38%), limited company BTL (37%) and holiday lets (36%).
Brokers saw growth in green mortgages (33%), then holiday let mortgages (32%) and limited company BTL (31%).
44% of lenders said these borrowers were the most underserved, with expat or overseas borrowers and holiday let or multiple property owners both at 43%.
Brokers reported difficulties securing finance for low Energy Performance Certificate (EPC) properties (39%), complex documentation for corporate and limited company structures (37%), and limited product options for complex or non-standard properties (34%).
Less than a third (29%) of lenders had a separate platform for specialist lending, but 36% were considering bringing one in, and 23% would look at the option in future.
Hamza Behzad, business development director at Finova, said: “The growth of the specialist buy-to-let market is too significant to ignore.
“What was once a niche segment is now a core part of many lenders’ strategies — but the nature of the customer has changed dramatically.
“Today’s specialist borrowers are more complex, and legacy systems weren’t built to support the nuanced affordability assessments or KYB/KYC checks they require.”
Behzad added: “Our research shows that while these products offer stronger margins and lower risk, many lenders are still relying on rigid processes that can’t keep up.
“To grow sustainably, lenders need to adapt. Those that invest in better tools and work closely with brokers to serve these customers more effectively will be best placed to lead the next era of specialist lending.”
