By Hamza Behzad, Business Development Director at Finova

The specialist BTL sector is evolving rapidly, moving from small landlords with straightforward needs to professional investors with complex portfolios. Finova’s new report examines the dynamics behind this shift.

According to our research, 63% of brokers have seen an increased appetite for specialist BTL products over the past year. And three quarters (75%) witnessed a surge in demand for limited company BTL products. This transition has created a golden opportunity for building societies to play a bigger role in the next era of BTL lending.

Over half of building societies (52%) acknowledge that borrowers with complex needs are the most underserved group, and the same proportion also believe limited company BTL carries a lower risk of default. They clearly see the opportunity and know borrowers aren’t getting the support they need. Yet the data shows they’re still struggling to keep pace with demand.

Brokers, meanwhile, are increasingly turning to lenders who can deliver speed, flexibility and a wider range of products. But despite strong ambition within the sector, many building societies remain hamstrung by regulatory pressures and tight margins which limit their ability to serve these borrowers effectively.

 

The barriers holding back building societies

Building societies are entering this phase with clear enthusiasm. 83% say their appetite for innovation is stronger than it was a year ago – the highest among the types of lenders we surveyed. And more than one in five plan to introduce a new specialist product type in the next 12 months.

But turning that ambition into action is proving tough amid a range of pressures. Regulation remains the most frequently cited challenge, with 62% of building societies noting this as the biggest barrier to innovation in specialist BTL. This is followed closely by concerns about borrower demand (45%) and margin pressures (45%).

A notable misalignment exists between perception and reality. 45% of building societies reference limited borrower demand as a barrier, despite 63% of brokers reporting increased interest in specialist BTL products. This gap between perceived and actual market demand is a key factor behind the widening delivery gap.

 

Where are building societies innovating?

It’s clear that building societies want to serve specialist landlords, but their priorities don’t always align with what the market needs. While 21% are directing their innovation efforts toward flexible underwriting for complex cases — exactly the area brokers say needs the most attention — overall priorities remain mixed and out of sync.

Building societies are prioritising innovation in broker support tools (21%) and green mortgages (21%) over areas like speed of service and range of products. While these are important areas, they’re not the solutions most likely to close the delivery gaps around speed, product range and handling of limited company structures.

A key area where building societies are ahead of the curve is in origination platforms. Nearly a third (31%) already have a dedicated platform for specialist lending, outpacing challenger banks (21%) and specialist lenders (25%). These systems give lenders the ability to scale new specialist BTL products quickly, automate more of the decisioning journey, and still keep expert underwriters firmly in control. In short, they make it far easier to respond to rising broker demand for limited company BTL.

 

The opportunity for building societies to close this gap

The specialist BTL market is evolving fast, and brokers are signalling loudly that they need lenders who can keep up. Building societies clearly recognise the opportunity, see the gaps in support, and are hungry to innovate. However, regulatory constraints, tight margins and misplaced priorities are slowing them down just when the market is speeding up.

The good news? Building societies already have the foundations to lead. Their adoption of dedicated origination platforms, appetite for innovation and deep underwriting expertise puts them in a strong starting position. What’s missing is sharper alignment with broker demand, including faster decisioning, broader product options and the confidence to back borrowers with complex needs.

If building societies channel their ambition into solving these delivery gaps, they can reset broker perceptions, capture a far greater share of specialist BTL growth and become the go-to partners for the next generation of professional landlords.

Find out more: Visit https://www.finova.tech/