Second charge lending improves but remains far below pre-Covid levels – FLA
There were 1,609 arranged during the month compared with 2,435 in February 2020 – the last full month before the Covid-19 pandemic began.
In keeping with this, the value of business written was also down, totalling £67m during the month and representing a 37 per cent decline compared to the year before.
Somewhat encouragingly, this was higher than the £62m and £56m worth of deals completed in December and January respectively.
The slower than hoped for recovery can be seen with second charge completions down on all measures as the three months to February recorded 4,437 new agreements, a 33 per cent drop on the same period the year before.
The 12 months to February recorded a 46 per cent contraction in business volumes with 15,417 agreements completed.
Again, a slump was evident where the value of second charge business dropped 39 per cent to £185m in the three months to February and halved annually to £640m in the 12-month period before that.
Fiona Hoyle, director of consumer and mortgage finance and inclusion at the FLA, said: “The UK lockdown restrictions over the winter months contributed to a fall of a third in second charge mortgage new business volumes.
“As consumer confidence improves and the economy re-opens, we expect to see a strong rebound in demand in this market.”
Evolution sees rise in prime borrowers and value of debts consolidated
And while the value of loans taken out has increased, so has the value of debts being consolidated by both prime and pure debt consolidation borrowers.
The data from Evolution Money covers close to 700 loans completed by the firm from March 2020 to February 2021 and segregates between those borrowers using loans for debt consolidation purposes, and those clients who have prime credit ratings.
The lender added that between the two six-month periods it saw a more than 40 per cent increase in the volume of seconds completed and it anticipated further increases.
It found that in the last six months until the end of February 25 per cent of its second charge mortgages taken out were by prime borrowers, up from 19 per cent in the previous six months.
And by value this had risen to 37 per cent up from 31 per cent in the March to August 2020 period.
However, debt consolidation borrowers continue to be the main customers, accounting for 75 per cent of all cases by number and 63 per cent by value.
Perhaps most notably, the value of debts consolidated by both types of borrowers grew between the two periods – by £1,936 for debt consolidation borrowers up to £15,277 and by £645 for prime borrowers up to £26,012.
For those borrowers specifically using a second charge mortgage for debt consolidation purposes, the average loan amount was just over £20,500 with an average term of 131 months and an average LTV of 74.2 per cent.
And on average they consolidated five specific debts.
Over the last six months, Evolution data showed the most common uses were to: pay a loan provider (49 per cent); pay a bank (37 per cent); pay off retail credit (eight per cent); and pay off car finance (five per cent).
Borrowers also used their second-charge mortgage to pay county court judgements, debt collectors, first charge mortgages and utility providers.
For prime borrowers, the average loan amount is £35,700 with an average term of 166 months and an average LTV of 77.4 per cent.
Prime borrowers are typically taking out these second-charge mortgages again for debt consolidation (59 per cent), home improvement and some consolidation (29 per cent) and home improvement (nine per cent).
The average number of specific debts being consolidated by prime borrowers was six.
More home improvement
Steve Brilus, chief executive of Evolution Money, said the firm had seen a notable uptick in both the volume and the value of second charges being taken out by those customers with prime credit ratings.
And he noted that reasons for taking out second charges remained consistent, although there was a growing desire to use funding for home improvements alongside paying off other debts.
“The increase in prime borrowers shows there is a distinct and growing customer demographic who may well have a mortgage need but are unwilling or unable to remortgage their first charge product in order to secure their funds,” Brilus said.
“As you might expect, the average loan amount for prime borrowers is higher and their uses for the money more varied, although we are still seeing most customers taking the opportunity to consolidate and pay off debts, with many also using the cash to improve their existing properties.
“This data – which will be updated every quarter from now on – does show second-charges may have a much broader appeal, especially to those prime borrowers who are not willing to extricate themselves from a first-charge mortgage especially if it means paying a substantial early repayment charge in order to do so,” he added.
LendInvest and Black & White make key appointments
LendInvest has promoted Jan Gallagher from business development manager (BDM) to key account manager.
Gallagher (pictured) will be working across the lender’s distribution channels including mortgage clubs and networks and will also be developing and delivering strategic marketing initiatives and helping to engage potential partners.
Gallagher has more than 30 years experience in the industry and joined LendInvest as a BDM in 2019 to source deals across the North West of England. She previously held roles at Vida Homeloans, Foundation Home Loans and Masthaven.
The firm is currently searching for a BDM to cover the vacant spot in the North of England.
Sophie Mitchell-Charman, sales director at LendInvest, said: “Over the last few years Jan has been an incremental addition to our business development team, driving strong business in the North.
“This transition is a natural one for Jan, who already played an important role in managing relationships with our Key Accounts: this new opportunity is a perfect opportunity for her to develop our strategy in this area further.”
Gallagher added it was an exciting time to be taking on this new role.
“I look forward to the challenge; both in broadening our partnerships and deepening our existing ones,” she said.
Black & White Bridging
Meanwhile Black & White Bridging, the rebranded Bath and West Finance, has announced its first two external appointments with the hiring of Heather Hancock as senior underwriter and Oliver Bland as relationship manager.
Hancock joins from Optimum Credit where she was involved in establishing and implementing the back office function, including credit policies and underwriting processes, the firm said.
Prior to that, she spent six years at Bank of Ireland where she held a mandate within the specialist lending team.
Bland joins from Interbridge where he combined underwriting with relationship management and has extensive experience in the bridging market across front and backend functions.
His previous experience included creating and leading the property team at Funding Options and underwriting and portfolio management at West One Loans.
Commercial director Damien Druce said: “We are delighted to welcome Heather and Oliver. They bring a vast store of experience and knowledge to the Black & White team.
“Both have worked closely with the intermediary channel and understand the importance of balancing introducers’ requirements against the need for a fair but robust underwriting stance.”
UTB provides last minute £6.7m loan for 25-home development
The project is being completed by Genesis Homes in a joint venture with Housing Growth Partnership. It consists of a mix of two to five-bedroom houses and bungalows.
Funding from UTB was required at short notice when the original lender withdrew its funding at the start of the Covid-19 pandemic, just before Genesis Homes was set to complete the site acquisition.
The developer approached the lender’s property development director Huw Jenkins for the loan.
Nicky Gordon, managing director of Genesis Homes, said: “Having our original funding offer pulled as we were about to complete our purchase of the site was far from ideal. Fortunately, I was aware that UTB was continuing to lend, despite the added complications and uncertainty surrounding the Covid-19 pandemic.
“Huw quickly appraised our proposal, liaised with Housing Growth Partnership and very soon afterwards confirmed that UTB would provide the funding we needed to acquire and develop the land.”
Jenkins added: “Although Genesis Homes is a relatively young company, it’s evident from their success over the last few years that they’re a company with a great reputation and a bright future.
“2020 was a challenging year for most housebuilders and I’m delighted UTB was able to step in at short notice and enable Nicky and the Genesis Homes team to crack on with this excellent new development.”
Clever Lending and F4B Network boost panel choice
The Home FlexiLoan allows borrowers to set up a credit line of between £25,000 and £1m which is secured against their property.
Borrowers can draw down funds in stages and are only charged interest on the amount released. Borrowed funds can be repaid with no early repayment charges.
Whatever loan amount remains outstanding on the fifth anniversary of the agreement is converted into a full-term mortgage.
Paul Day (pictured), director of business development at Clever Lending, said: “We’re privileged to be one of a small number of specialist distributors that brokers can use to access Selina Finance products.
“The ability to use equity within properties is nothing new – but having a pre-approved facility ready to use as and when borrowers wish – with speed – makes complete sense.”
F4B adds Hodge to panel
F4B Network has added Hodge Banks to its lending panel.
Hodge Bank offers residential and buy-to-let deals with a focus on holiday let and buy-to-let portfolio products.
Steve Swyny, commercial director at F4B Network, said: “We are seeing an uplift in buy-to-let business with the holiday-let market rapidly expanding due to the Covid-19 situation and Hodge’s portfolio product is already stimulating interest amongst our advisers as very few lenders offer such a facility.
“This is a panel addition which will help better service an increasingly diverse set of borrowing requirements and we will continue working with lenders who offer value and a real point of difference for our members and their clients.”
Glenhawk products added to Twenty7Tec sourcing
Brokers will initially have access to the lender’s regulated bridging product range with its unregulated products being added on to the Source module in due course.
The regulated range is available at up to 70 per cent loan to value with rates starting at 0.59 per cent per month.
Glenhawk has had a busy start to the year – last month it announced it had begun lending in Scotland, while in February it appointed Jamie Pritchard as director of sales.
It typically offers loans from £250,000 to £5m, spanning the residential and commercial sectors.
Pritchard said the lender was “incredibly excited” to be making the move.
“In today’s competitive market, it is vital that we find platforms that allow brokers to obtain a financial solution that best suits their customers, as efficiently as possible,” he said.
Nathan Reilly, head of lender relationships at Twenty7Tec, added: “We’re delighted to be partnering with Glenhawk as it looks to support even more brokers and customers with their specialist lending needs.”
Shawbrook cuts commercial product rates
The rate changes affected variable rate products for loans of more than £100,000, with the lowest rate now 5.19 per cent.
The biggest cut applied to the semi-commercial offering at 65 per cent loan to value LTV.
The lender’s commercial investment range covers loans of £50,000 to £25m, up to 75 per cent LTV.
The products can be used for complex commercial investments like serviced offices and property multi-lets on licences.
“The commercial investment sector has faced great change and uncertainty over recent months. We remain fully committed to helping brokers maximise the abundance of opportunity that exists,” said Gavin Seaholme, head of sales at Shawbrook Bank.
HMOs have added value but first-timers need their eyes wide open – Moloney
According to the latest research by BVA BDRC, HMOs continue to generate significantly higher average rental yields compared to other property types – seven per cent compared to the overall average rental yield of 5.8 per cent.
When you factor in the added peace of mind that comes with knowing that if one tenant moves out there is less exposure to arrears, it’s no surprise they are proving so appealing to clients looking to maximise their investments.
And it is not just experienced landlords with years of rental know-how behind them; HMOs are also attracting the attention of investors looking to take their first steps in the buy-to-let market.
As with any financial investment, however, there are downsides as well as upsides.
Managing HMOs can be challenging, and first-time buyers in particular should only go into an arrangement with their eyes wide open.
Many people believe a property only becomes an HMO when five or more people forming more than one household are living it.
Not only is that incorrect, it could potentially have very costly consequences for landlords. A property is actually classified as an HMO when it’s occupied by at least three unrelated tenants forming more than one household who share toilet, bathroom or kitchen facilities.
While HMOs with five or more unrelated people are subject to mandatory licensing with all local authorities, some councils insist on landlords with fewer residents obtaining a licence.
Landlords failing to apply for a licence when one is required could face a fine of up to £20,000, plus costs.
Adding up the costs
The costs associated with running an HMO can be higher compared with a traditional single let property too.
Start-up costs can mount up if conversion work needs to be carried out or furniture needs to be purchased, while running costs for letting agents, utilities and maintenance can soon eat away into those much vaunted potential higher rental yields.
Finding the right HMO mortgage
Finally, aspiring first-time HMO landlords might find their choice is more limited when it comes to securing the finance they need.
Their complex nature can mean there is often more work in managing HMO properties, resulting in some lenders being more cautious as a result. Many lenders will insist on some form of letting experience before they will lend to someone buying an HMO.
So if you’re approached by a client who still wants to purchase a house in multiple occupation but who doesn’t have any previous buy-to-let experience, would you know where to turn?
There are lenders out there who can support both you and your client every step of the way.
As some doors shut in certain areas of the buy-to-let market, different ones are opening up.
Paragon sees strong regional demand for BTL and specialist rentals
The update draws on expertise from Neil Smith, head of surveying at Paragon, and his team of regional surveyors.
High demand was seen in many places, with the “stand-out example,” South Yorkshire, where agents have received multiple applications for all house types and from all age groups, Smith said.
Single residential units were said to be much in-demand according to Paragon’s surveyors in East Anglia and the North Midlands.
The lender reported continued strong demand for commuter-town properties with rail links into London. As well, it pointed to “a consensus among landlords and developers that London will continue to attract younger tenants.”
Investors have shown an appetite for good quality homes in multiple occupancy (HMOs) in the South West, including for student properties, in towns like Bristol, Bath, Exeter, Cheltenham and Gloucester.
The student market was singled out as performing well overall, with HMOs in Cardiff, Swansea and Manchester let for the academic year beginning in September.
The holiday lets market was reportedly strong too, covering coastal and rural areas and including “very high demand,” in the North East, Smith said.
Wider market buoyancy
Meanwhile, Knight Frank reported a record-breaking March for the wider housing market. The agency saw the highest number of exchanges for ten years in the month.
The figure was nine per cent higher than December 2020, which produced the second-highest monthly figure for a decade. And it was 12 per cent above March 2016, when the Stamp Duty surcharge was introduced.
Tom Bill, head of UK residential research at Knight Frank said: “The surge seen last month is likely to continue until the summer-time, at least.”
Catalyst launches credit repair and AVM-enabled bridging products
The lender said it was revamping its range of short-term finance options for bridging, refurbishment, commercial and land purchase.
Loans are now available up to 75 per cent loan to value (LTV) with rates trimmed to start from 0.5 per cent per month.
The credit repair bridging option is available to help borrowers with credit issues, while the AVM residential product is targeted for lower leverage residential loans.
Catalyst is also returning two other products for land with planning and its 100 per cent commercial bridging deal.
Anna Bennett, marketing director at Catalyst Property Finance, (pictured) said the firm was excited about this product launch.
“Brokers will see that LTVs are up and rates are down across our range,” she said.
“The UK bridging market is incredibly active; this is the perfect time to sharpen our pencils and provide even more options for brokers and their clients.”