The Intermediary – March 2026 - Flipbook - Page 53
I N P RO F I L E
“You do that by having both commercial and
residential product sets competitive in their own
right,” Davidson says. “Then, the business will be
what it needs to be.”
The past eight years since Redwood’s inception
have been nothing short of “unprecedented.” This
environment persists in 2026.
Manual underpinning
This, of course, creates potential instability across
all sectors of the property market. Rather than
retrenching, however, it has shown the importance
for banks like Redwood to find ways to weather
the storm, manage business profitably, and grow
sustainably.
During Covid-19, this meant shifting more
towards the residential BTL side of the business.
Now, increased demands on portfolio landlords,
coupled with rising operating costs, mean
borrowers are placing greater emphasis on
predictable cashflow. For many investors,
maintaining stable income streams while
managing finance costs is now a central part of
portfolio strategy, as is having a mixed portfolio of
residential and commercial investments.
Both commercial and residential tracks are
important to the business in 2026. Indeed, while
regulatory demands and tightening margins
are making it harder for smaller scale landlords,
“professional landlords that have got bigger
portfolios and a limited company structure behind
them remain relatively resilient.”
Uncertainty and instability are part of life, most
recently with events in Iran causing widespread
speculation – from whether war will directly affect
the UK, to the impact on fuel prices, and questions
around the upcoming base rate decision.
Davidson says: “That's how challenging it can be
when you think about how you have to adapt from
a strategic perspective. All of these are variables
that will drive decisions throughout the year.”
It is not all doom and uncertainty, however.
The regulator’s requirement for robust scenario
planning means that banks are less likely to
experience unexpected shocks to their loan books
as they are well prepared.
This adaptability is further strengthened by a
close two-way feedback relationship with brokers.
Davidson says: “There’s nothing more rewarding,
or that has better value, than asking your brokers
for their views on what would work to improve
the proposition. You'll always be chasing a
competitor who is bigger than you, who might be
able to drop their price quicker than you, or do
something slightly different. You can't follow all
your competitors. But what you can do is deliver
what your broker is saying they want. They know
so much more about the industry and the business
than many of the staff in banks will ever know,
because they live and breathe it everyday.
“That’s the important thing: listen to the people
that actually bring your business in.”
While Redwood Bank aims to adapt its strategy
organically and make changes as needed, one
thing continues to underpin all lending decisions –
manual underwriting.
Despite the great AI and automation debate,
Davidson says: “We have reached out to our
brokers to ask, has the AI boom really affected
them yet? Some say yes and some no.
“The larger packagers – who we deal with less,
to be fair – are seeing more impact because they've
got the high volume and they need to be able to
filter accordingly and get some assistance to help
them do more business. That's understandable.
“However, for the more bespoke brokers dealing
with quirkier, less vanilla and slightly more
complex deals, AI can only go so far right now. I'm
sure in 10 years’ time it'll be different, but many
of our brokers are saying it hasn't really touched
them as yet [...] Manual underwriting therefore
still applies and is valued by our brokers. Are
we investigating AI options? We are, but more
internally to help with operational efficiencies. It’s
not the major thrust of our strategy in 2026.”
This is about keeping a finger on the pulse.
Adoption of automation and AI for its own sake
runs the risk of “investing vast sums of money on
a platform or IT system that doesn’t actually bring
any better customer value, or better-quality deals.”
Redwood is committed to its manual model.
Nevertheless, it is always on alert for potential
changes that might support underwriters and
make the process slicker, while creating the
space to handle with care those cases “with more
nuances, subtleties and complexity.”
This set-up also lends itself to serve those
customers that are underserved by larger, more
algorithm-driven banks.
Davidson says: “It's no surprise that there's a lot
of smaller and mid-sized banks that are focusing
on SMEs. It's great for the industry.
“I think the Government could do more work
with the smaller banks, because we are in the
sweet spot of helping SMEs expand their portfolios
and their businesses.
“Regulation makes it difficult for challenger
banks to build scale without large capital
injections. But most of them are trying to do really
good things for SMEs.
“SMEs are the engine room of the UK economy,
as are the types of properties they are investing
in – such as mixed-use – and we are doing what we
can to do the right thing for them.”
Managing market uncertainty
March 2026 | The Intermediary
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