Habito enters limited company buy-to-let market
The broker-turned-lender is offering fixed term limited company products for up to 10 years and at up to 80 per cent loan to value (LTV).
As with its first range of buy-to-let deals launched in July, these products will only be available through the broker firm itself.
Habito said the rates on offer were among the most competitive in the industry and an introductory cashback offer of £250 is available for a limited period.
Two-year fixed rate prices starting at 2.59 per cent for a 60 per cent LTV product the firm claimed a market leading rate at 75 per cent LTV of 2.84%.
It also aims to cut time to offer to 10 days.
Daniel Hegarty, founder and CEO of Habito, said: “In spite of uncertain political and economic times, financing a buy-to-let property through a limited company is proving to be a very appealing route for a growing number of landlords.”
The firm has also produced its terms and conditions in coordination with Fairer Finance to receive its “Clear & Simple” mark.
Bridging lender Offa targets default borrowers with ‘transparent and ethical’ approach
The newly launched lender told Specialist Lending Solutions it wanted to focus on the re-finance market and that it would not shy away from those loans which were non-performing.
It also revealed that it was considering a banking or credit union licence and that it expected its main source of growth to initially come from outside the Muslim community.
Ethical lending, charity donations
There has been much discussion over default terms within the bridging market this year, with concerns raised that some lenders were not being clear to borrowers about charges and penalties.
However, Offa head of investments Haris Akhtar said the lender was not going to take advantage of people in difficult situations.
“Our pricing is going to be fully transparent. We are ethical lenders, we have moral obligations, we ultimately want to be fair lenders,” he said.
“As a Sharia-compliant lender we have to fit in a lot more ethical responsibility. We have to donate a percentage of profits to charity.
“For default borrowers we will charge a default premium, but we have to donate that to charity, so ethical responsibility is very much an element of our operation.”
And he added that re-financing defaulted loans would be a key part of the lender’s business plan.
“Where there is an agreement with the existing lender we will try to facilitate a re-finance,” Akhtar said.
“A lot of lenders shy away from defaulted loans, but we see that as being a good space to be in.”
Akhtar agreed the bridging market was particularly competitive with rates coming down and noted the lender would need to be rate conscious to attract business, but added it would not “depress underwriting standards” to do so.
Broker portal planned
Akhtar was clear that the broker market is an important one for it to follow with targets for a ten-day application-to-drawdown process, with the intention to then further reduce that.
Head of operations Bilal Ahmed is already in contact with many firms and a broker portal is also being planned for its overall platform.
“The aspiration is to start within real estate lending and the development world but extend that into auto and unsecured finance,” he continued.
“We’re building a technology platform which will allow us to roll out those products over time.
“And we’re looking to potentially get a banking licence or credit union licence which will give us a lower cost of capital.
“Combining private funding with a credit union licence and the potential leverage we can use is much higher because we can take regulatory deposit protection,” he added.
Conventional bridging lending
Perhaps slightly surprisingly, the firm said it was taking a pragmatic approach and its initial growth was likely to come through the more conventional market, rather than the Muslim population.
“We are actively trying to target that conventional market and doing so by attractive referral rates to brokers,” Akhtar said.
“We should be able to get good deals flowing through our desk from these brokers. And we expect the Muslim proportion of borrowers will increase but that will be through word of mouth, marketing and referral action in Islamic finance.
“The problem has been that Islamic finance has always been more expensive, so we need to be a competitive provider and have great service.”
The Muslim population is currently around eight per cent of the UK population and growing.
Offa plans to target some of the main geographic areas of this population including Birmingham, Manchester and Leeds, and this will be reflected in its lending strategy.
“As a result, we will focus on regional centres where the return is more interesting. We’re not really focusing on London and the South East,” Akhtar concluded.
UK property investors shelve plans until Brexit is clearer
A study of more than 1,000 UK property investors who own three or more residential properties in the UK found that 55 per cent had put their investment plans on ice.
The research commissioned by property investments agency Experience Invest discovered that 59 per cent of investors had shelved plans until after the 2019 Autumn Budget in November.
Additionally, 37 per cent admitted they had taken a listed property off the market due to a slowdown in activity, while 52 per cent said they were monitoring properties that they wanted to purchase, but were waiting to see if prices fluctuated as Brexit approached.
And, 51 per cent of property investors believed there would be a surge in activity in the market after 31 October.
Support for prime minister Boris Johnson’s strategy was muted, with 56 per cent of investors having no faith that he would make a success of the UK’s departure from the EU.
Investors appeared confident the real estate market will remain resilient longer-term, despite Brexit uncertainty, with only 31 per cent anticipating that leaving the EU would negatively affect the value of their portfolios.
Experience Invest’s research found that because interest rates had remained below 1 per cent for the past decade, 59 per cent of property investors were actively seeking ways to make their money work harder by changing their investment strategies and the assets they hold.
Jerald Solis, business development and acquisitions director at Experience Invest, said: “There has been a great deal of speculation about how Brexit will impact the UK’s property market.
“Our research clearly shows many property investors are now adopting a ‘wait and see’ approach as the Brexit deadline draws near.”
He added: “This means there could be a surge of activity once Brexit materialises. Once the dust settles, investors are evidently preparing to spring back into life, which could result in far greater activity across the UK property market.”
Rising number of landlords point to ‘booming’ tenant demand ‒ Paragon
The proportion of landlords to hold that view was the largest in almost a year and had grown in consecutive quarters for the first time since Q2 2017.
However, the amount of landlords reporting that tenant demand was stable, growing or booming had dropped to 81 per cent, down from 86 per cent in the last quarter.
The report noted that portfolio sizes are on the rise. The average landlord had 13.2 properties in their portfolio, up slightly from the 13.1 in the last quarter. This is the third straight quarter in which the average has risen.
Despite this, the report suggests there is caution among landlords over expanding further, with respondents expecting to have an average of 12.8 properties in a year’s time.
This conservative approach is coming through on financing too, with average portfolio gearing having fallen from above 40 per cent five years ago to just 33 per cent today.
Overall landlord optimism has dropped still further from the 13 per cent recorded last time around to just 11 per cent.
John Heron (pictured), director of mortgages at Paragon, said that a clear picture was emerging of the impact of various government and regulatory “interventions” were having on the private rented sector.
He continued: “Landlords have been buying fewer properties and selling more at a time when there has been a resurgence in tenant demand. The Royal Institution of Chartered Surveyors reported a similar trend in its August survey. It’s widely anticipated that this will lead to reduced choice and higher rents for tenants. This is probably not the outcome that policy makers were looking for.”
Hampshire Trust Bank completes £3.1m complex loan within fortnight
The loan to a family-owned business included remortgaging a block of 20 flats and providing £1m to fund a new development.
The remortgaged block was considered well located, next to Ruislip underground stop in Hillingdon borough, north-west London, and contained a mix of studios, one- and two-bed flats.
HTB saw the bespoke deal through from enquiry to completion in two weeks.
Jason Capriole, lending director at the broker Kingswood Associates, said: “We needed to deliver an equity release quickly for the client. HTB’s dedicated team and streamlined approach to lending enabled us to perform a complex term debt transaction in bridging timescales, saving considerable time and money.”
Alex Searle (pictured), sales director, specialist mortgages at HTB , added: “We specialise in bespoke solutions. This transaction highlights our ability to provide dynamic, flexible service and our dedication to delivering excellence through specialism for our broker network.”
Shawbrook launches self-service product switch platform for BTL customers
The lender said flight times had been decreased to 48 hours with the My Shawbrook Portal, which has been built to improve the experience for broker partners.
Mortgage Solutions has contacted Shawbrook to ask how long the transfer times were before the introduction of the portal.
Its like for like product switch is offered with no arrangement or product fee, while the introducing broker partner will still receive a commission determined by the customer submission preference on every case that completes.
The portal allows the bank to assist its brokers’ retention activity as it gives control of the 10 minute application to the customer, but sets out to keep the broker involved in the process.
Emma Cox, sales director for the Shawbrook Property Division, said: “A huge amount of work has gone into the design and development of the portal based on extensive feedback from our network of brokers, and our own research.
“This was one of the main requirements of the scoping phase and we were conscious that, although as a regulated bank we are obligated to provide ongoing product solutions for customers, we also have an obligation to our core distribution around which we have built this business.”
Landlords support NLA and RLA merger
Members of the NLA and RLA voted for the two organisations to form the new National Residential Landlords Association (NRLA) following meetings today.
The trade bodies said the merger will provide a stronger voice for the private rented sector.
The new organisation will boast more than 80,000 landlord members making it the sector’s largest trade association by far.
It will speak for members owning and managing half a million properties or about 10 per cent of the private rented sector. It will officially launch on 1 January 2020.
More powerful voice
RLA chairman Alan Ward and NLA chairman Adrian Jeakings issued a joint statement.
They said: “We are delighted that landlords have backed plans for a new, stronger body to represent them and their interests.
“The new organisation will have a more powerful voice to support landlords, provide services to them and to lobby government.
“Both organisations will now move forward together to appoint a new chairman and directors for the NRLA,” they added.
The body will be seeking candidates internally and externally for the positions and said it would welcome expressions of interest from members for these posts.
Together signs ‘eleventh hour’ £1.5m bridging loan for client
The client needed the finance to buy land but had a deal with another lender fall through just days before the deal was due to complete.
The property company’s retained mortgage broker SPF Private Clients brought the case to Together and the specialist lender agreed a commercial bridging loan of £1.5m, secured against the land.
Ritchie Watson, lending director at Together, said: “This was a strategic purchase of a piece of agricultural land, which would be the final piece of the jigsaw in a wider project.
“SPF provided all the necessary documents and our commercial underwriting team pulled out all the stops to get this deal across the line ahead of the customer’s completion date.”
Amadeus Wilson, director of short-term finance at SPF private clients, added: “We knew that Together would be able to provide the necessary funding within a tight timeframe. In the end, the client was delighted that we managed to achieve an impressive three-day turnaround from the application being submitted to funding being received.”
Specialist Lending Solutions contacted Together for the identity and location of the client and land, but was told they would remain confidential.
Shawbrook and Prospero Finance help client raise £527k on complex BTL deal
The investors wanted to refinance the freehold on the block of six recently converted flats in Gillingham, Kent which generate £45,000 of rental income per annum.
The client’s aim for the capital raise was to help with the expansion of their portfolio through the development and refurbishment of additional properties.
Shawbrook’s underwriters worked closely with Prospero Finance – which specialises in residential investment – from application to completion.
The process was said to be “largely seamless”, except for one challenge where the client requested that the aggregate value was taken into consideration, rather than the block value.
Taking this into account, the underwriting team navigated it with buy-in from both broker and client to deliver the completion.
Shawbrook financed the £527,000 capital raise on a 10-year interest-only term at 75 per cent loan to value (LTV).
Martin Smedley, director at Prospero Finance, said: “Our client has significant plans for their portfolio and I’m really pleased we were able to help them along their property journey.
“Shawbrook dealt with the case smoothly, even when there were a couple of small issues to navigate along the way, but their flexibility was a factor in getting this deal across the line.”
Richard Winston, business development manager at Shawbrook, added: “With specialist brokers like Prospero working alongside our experienced underwriting team, we ensured that we could support the client on their property journey.”
Extraordinary and left-field circumstances which affect lending decisions – Aspen
Bridging finance is a problem solver.
Although in recent years the scope of the sector has widened and become more vanilla, bridging has always had grey areas and it’s here that specialist lenders need to excel.
Let’s look at five very different situations that will ultimately affect a lending decision and what they mean for an application.
We focus on deals that are doable. If they’re not, we tell the client why not within the first five minutes.
Most of the time this comes down to affordability, loan-to-value or troublesome financial backgrounds.
But some very interesting applications cross our path, and here’s where true expertise needs to rise to the top.
To be clear, I am not a lawyer and this does not constitute legal or financial advice, but here are some left-field scenarios with examples of when a lender can and cannot lend.
If a client is undergoing a divorce the underwriter should take care to understand that the divorce is settled, either in or out of court, or that both parties in the marriage have received independent legal advice and consent to the loan. This is regardless of in whose name the property may be.
If one party is trying to pull funds out of the property quickly before a claim is made of an interest in the property, the underwriter must avoid facilitating this or the lender may become exposed.
2. Sale at undervalue
Sales at undervalue are commonly banded about in the market, but there are some that are satisfactory and others that are insupportable.
When a client gets an option to purchase a site and then adds value through works or planning this, in our view, is fine – the real value of the site ought to be higher than the purchase price and this should be accounted for as long as the developer has adequate ‘skin in the game’.
When a family member gifts equity this is also acceptable to us – people have given property away to their children since time immemorial – and clearing the mortgage through a purchase is acceptable. A deed of gift and correct tax treatment is needed but this is, in Aspen’s view, acceptable.
“I bought it at auction”, “I am buying in bulk” and “the client is a good negotiator” are obviously terrible reasons.
The market is not as strong as it was in 2016 in some areas and people think things are worth more than they are – buying in bulk almost invariably leads to selling in bulk in a difficult situation and underwriters should anticipate this.
“The seller is desperate for a quick sale” is an interesting one. The lender must establish that the seller is of sound mind and is not a vulnerable person. They should also look at whether the numbers make sense – does moving country or fear of repossession merit the level of discount?
At Aspen we steer clear of these because nine times out of 10 something awful such as intimidation or fraud is happening in the background.
The worst one is “the receiver is flogging it cheap”. If correct, this is a criminal action and a major breach of the duty of care to the current owner’s equity position. An absolute ‘no’ and probably a note to self to avoid the receiver is needed here.
The second part of Jack Combs’ article will appear on Specialist Lending Solutions shortly.