Advisers confident but valuations and seconds a big concern – Shawbrook
Two thirds of buy-to-let, commercial and bridging brokers said they were confident about the lending environment for this year with a similar number feeling positive about the growth of their business.
The Shawbrook Broker Barometer also found there was optimism around the economy in general, as 44 per cent of broker respondents said they were either very confident or fairly confident in the future of the UK’s economic state.
The market’s bounce back once it reopened last year helped to boost the performance of broker firms too.
A third said transaction volumes were currently up by 20 per cent or more compared to the beginning of 2020. Almost one in ten have seen business increase by 30 per cent or more while three per cent reported annual growth of 40 per cent or more.
Second charge brokers did not fare as well according to the survey, as a third said business levels were down by 30 per cent or more, and almost a quarter had seen a decline of 40 per cent or more.
A lack of confidence was also evident in the outlook of second charge brokers with 69 per cent saying they were ‘fairly concerned’ about the lending environment this year.
Business growth was also expected to be a challenge as 12 per cent of second charge brokers said they were very concerned about their business performance and 42 per cent said they were fairly concerned.
Just 19 per cent of second charge brokers were fairly confident about their business this year.
Feelings towards the wider economy were more positive with this group however, as half felt either very or fairly confident about the UK economy.
Areas of growth
Increased investment is expected in 2021, as 62 per cent of buy-to-let, bridging and commercial brokers said they predicted investors to expand their property portfolio.
As for the segments of the market that are expected to do well, 29 per cent forecast the buy-to-let market to experience the strongest growth this year and a further 29 per cent believed they will see a good performance in bridging business.
Second charge mortgages and semi-commercial investment were respectively predicted areas of growth for 14 per cent of brokers, while 11 per cent predicted the residential market would do well.
Furthermore, 42 per cent of brokers working in the second charge market said they expected to see growth in this segment and 38 per cent expected increases in residential business.
Restrictions relating to the pandemic and lending behaviour were common concerns with all specialist brokers as three quarters of buy-to-let, bridging and commercial brokers believing lending restrictions would impact business while 96 per cent of second charge brokers said the same.
The second main concern for buy-to-let, bridging and commercial brokers was valuation issues, with 66 per cent citing this as a worry, while 69 per cent of second charge advisers were worried about Covid-19 restrictions.
Emma Cox, sales director of property finance at Shawbrook Bank, said: “The optimism among brokers, even in the face of enduring uncertainty while we continue to navigate the Covid-19 situation, is great to see.
“The growth in business volumes when compared to the beginning of last year imply a robust recovery, which is likely to be fuelling the positive outlook for the year ahead.”
She added: “Despite the optimistic outlook, as we move further into lockdown 3.0, we understand there are still many brokers facing challenges, which is why it remains crucial for lenders to continue to work closely with brokers over the coming months.”
Brotherton advises UTB on £6m funding for beachside hotel conversion
Brotherton Real Estate advised on the case which was put forward by developers Harrington Homes.
Work has already begun on the site next to Harlyn Bay beach which has seen the former Harlyn Inn Hotel demolished to be replaced by a three-storey development.
The finished building will consist of 14 two and three-bedroom apartments and ground floor commercial space.
The projected has an estimated gross development value of £11m when finished.
Brotherton Real Estate introduced Harrington Homes to UTB in October with purchase completion due to take place in early November.
UTB said that although Harrington Homes was a new customer the firm had extensive development experience and a strong track record around the South West.
The lender’s credit committee agreed to provide the £6.18m required to cover the balance of the site purchase, construction costs, professional fees other obligations.
An extended repayment term was agreed to provide Harrington Homes with greater flexibility should the pandemic create disruption to the construction timetable.
Demolition works were underway within two weeks of the completion of the site acquisition and the first apartments should be released for sale around Easter 2021.
Robert Kleinman, chief finance officer of Brotherton Real Estate, said: “Mark Pannell and the United Trust Bank team pulled out all the stops to provide a quick decision on this deal and have the funds available within around six weeks of our first conversations.
“I’m very pleased to get another competitive funding deal with UTB over the line and look forward to working together on future deals.”
Mark Pannell, senior manager – property development at UTB added: “Harrington Homes have established a strong reputation for delivering high quality developments and I’m delighted that UTB will be providing the funding to create these superb homes in a stunning location.
“We had to move quickly on this deal and Brotherton’s involvement was crucial to us getting all the information we needed when we needed it.
“With around 40 buyers already showing interest in the apartments, I’m sure this will be another successful development for Harrington Homes and the bank.”
Crystal Specialist Finance and Loans Warehouse unveil new hires
Adam Tauber (pictured) has joined Crystal to head up its development finance
He joins from Affirmative Finance where he was a relationship manager, and was previously a business development manager at Together.
Tauber said: “The development finance market in the UK continues to perform well, and Crystal has a well-established position in the sector.
“I am looking forward to building on the foundations they have laid and raising the bar still further, working closely with brokers and lenders to deliver exceptional results.”
Jo Breeden, managing director of CSF, added: “Housing is clearly a priority for this government, therefore demand from developers will only grow in 2021 and beyond.
“Adam’s knowledge and previous mandated experience within lending environments will be crucial to support our brokers and help educate those new to this area of finance.”
Loans Warehouse adds to bridging team
Greg Chase has joined Loans Warehouse’s short term finance team as senior bridging adviser.
He will be tasked with further expanding the specialist broker’s bridging proposition – an area that Loans Warehouse has focused on in recent months.
Chase was previously a broker, specialising in commercial and bridging finance, with the Commercial Finance Network.
He has also held sales and underwriting roles at Enterprise Finance, The Loans Engine and Prestige Finance.
Matt Tristram, co-founder of Loans Warehouse, said: “We are delighted to welcome Greg to Loans Warehouse. While some firms have found themselves having to reduce headcount over the past months we have been expanding.
“The appointment of Greg is a further commitment to improving our bridging finance proposition and comes in advance of a number of key new additions to our bridging finance panel. Greg will be a key figure over the next 12 months within our bridging team.”
Chase added: “I am pleased to be joining Loans Warehouse and look forward to working with the team. The coming months will see strong demand for bridging finance and Loans Warehouse is well placed to help service those needs.
“I look forward to getting started.”
Know Your BDM: Jack Gerasimov, Foundation
What locations and how many advisers do you cover in your role?
I have recently been promoted to join our field sales team and am currently looking after 1,138 brokers in the south region.
How have you changed the way you establish and maintain a good relationship with brokers in the pandemic?
The methods of building trusted relationships have not changed that much apart from the obvious inability to meet face-to-face. As before, for me it’s all about being there for the brokers – being transparent and accountable is the key.
What personal skill is most valuable in doing your job?
Time management – I always keep a good time balance to make sure I am contacting as many brokers as I can in a day, while keeping up with the incoming phone calls, Teams meetings and e-mail enquiries. And last but not least, to make sure I’m finished in time for dinner with my growing family.
What personal talent would you most like to improve on?
I’m pretty famous for growing increasingly impressive moustaches for Movember, and my dad-dancing could use some work, but I believe you can continue to improve on any level of talent or skill, and I treat every day as an opportunity to do so.
Where would you rather be stuck, in bumper-to-bumper traffic or back-to-back Zoom calls?
That’s a tough one. Working from home since March I do miss field work, even if it does mean being stuck in the traffic. I’m looking forward to the time when we’re able to do both.
What’s the best bit of career-related advice you’ve ever been given?
Where one door closes, another opens.
What is the most quirky property deal you’ve been involved in?
I have quite a few. I enjoy dealing with large portfolio cases, they come with a variety of different properties and variety of different challenges.
What has been your lockdown coping strategy?
Exercise: run, walk, cycle…move as much as possible.
If you were head of the FCA for the day, what would you change about regulation in the mortgage industry?
I wouldn’t, at least not without consultation from a range of other parties. As far as I am concerned, things are working well so why change it?
What was your motivation for choosing business development as a career?
I was always good at it and enjoyed communicating with people, while my main drive is helping to solve issues and challenges. So, it was a no-brainer.
If you could do any other job in the property sector, what would it be and why?
CEO of Foundation Home Loans, to truly understand what it is like to run a large, successful and rapidly growing company.
What did you want to be growing up?
An astronaut, just like every other little boy in Russia back then.
What’s your favourite face mask design to wear?
Well, the one with Foundation Home Loans logo of course. Always ready to represent.
And finally, what’s the strangest question you’ve ever been asked?
Once or twice I was asked if it’s true that bears walk on the streets of Russia.
Evolution seconds range for Covid-hit borrowers allows 140 per cent LTV
The lender said it was addressing a need in the market and would allow customers with missed payments and other recent credit issues to apply.
Recent missed mortgage payments are accepted on the full range with additional householder income considered and self-employed customers accepted.
Loan to values (LTVs) up to 140 per cent are being accepted with no previous mortgage history required.
Rates start at nine per cent with no consent required on loans up to and including £50,000.
Evolution said its range offers brokers wider scope to serve clients who have missed mortgage payments during 2020, seen a change in employment status or have had their credit score adversely impacted since their pre-Covid mortgage application.
According to data from Knowledge Bank, advisers have been increasingly seeking second charge options for borrowers with financial issues such as defaults.
Operations director Kerri Pender (pictured) said: “We are pleased to bring this new range of products to the market which we believe are highly relevant for the circumstances in which many borrowers find themselves in during 2021 since the onset of the pandemic last year.
“We have listened carefully to the marketplace and it is clear that many brokers demand innovative and more flexible lending criteria to assist clients raising finance through a second charge product.
“We approved more than 5,000 second charge loans last year and we predict we will see an increase in approvals this year.”
Pender added that she expects 2021 to be a big year for the second charge lending market and that the lender had further developments planned.
No VAT cut for building refurbishment – Treasury
A lower VAT rate of five per cent applies to these situations already and Treasury dismissed the idea of cutting this to zero.
Responding to a written question, financial secretary to the Treasury Jesse Norman said: “The government already maintains a reduced rate of VAT at five per cent, subject to certain conditions, for residential renovations.
“Introducing a zero rate of VAT would come at a significant cost to the Exchequer, estimated at about £4bn per year, which would have to be balanced by a reduction in public spending, higher borrowing or increased taxation elsewhere.
“While the government keeps all taxes under review, there are no plans to change the VAT treatment of the repair and renovation of buildings.”
Conservative MP for Wycombe Steven Baker had asked the Treasury to assess the impact of reducing the VAT rate on building refurbishment works to zero.
Record number of BTL limited companies formed in 2020
According to Hamptons, around half of all buy-to-let property purchases are now completed using a limited company.
Operating a buy to let was the second most popular reason for forming a limited company in 2020, the 41,700 total being just behind the 43,200 firms created for online and mail ordering.
Hamptons, which analysed the data, said this took the number of BTL limited companies to 228,743 and illustrated the impact of the tax changes in 2016.
The number has more than doubled since 2016 when tax changes for landlords were introduced, rising by 128 per cent
“Between the beginning of 2016 and the end of 2020, more companies were set up to hold buy-to-let properties than in the preceding 50 years combined,” Hamptons said.
“In 2016, a three per cent stamp duty surcharge came into force and the proportion of mortgage interest deductible from tax on buy to lets held in personal names began to be phased out.
“As a result, investors have changed the way in which they purchase properties, with increasing numbers shifting towards limited companies to reap further tax benefits.”
Southern-based landlords were most likely to incorporate.
A third of all BTL companies set up in 2020 were in London and when adding the South East this accounted for almost half of all incorporations.
Hamptons noted the benefits of incorporating in these areas were likely to be bigger due to the greater propensity to be mortgaged and a higher mortgage interest bill.
The tax benefits of holding property in a company derive from the ability of landlords to offset 100 per cent of mortgage interest against profits, while those holding a property in their own name can offset just 20 per cent.
The rate of rental growth accelerated sharply in December to reach its fastest rate of increase since July 2016.
Over the last three months, annual rental growth rose from 1.4 per cent in October to 3.0 per cent in November and to 4.1 per cent in December.
Once again, all nine regions in England saw rents rise during December, with rental growth also turning positive in Wales.
Rents in London began to rise in November for the first time since the start of the pandemic, following eight months of falls with a further jump to 1.6 per cent in December.
However, rents in inner London remain well down on last year, falling 11.5 per cent between December 2019 and December 2020 – a slight recovery from the 12.7 per cent year-on-year fall recorded in November.
Half of all BTLs bought in limited companies
Aneisha Beveridge, head of research at Hamptons, said: “We estimate that around half of all rental properties bought today are being put into a company, up from close to one-in-five during 2016.”
“While most of this growth has been driven by larger landlords, smaller landlords, particularly those who are higher rate taxpayers, have also reaped the tax saving benefits from incorporating.”
She added that with more high street lenders entering the limited company space in recent years, competition has driven down interest rates to within a percentage point of similar products designed for landlords purchasing in their own name.
As prospective tenant numbers rose above 2019 levels while the number of rental homes on the market fell by double-digit percentages everywhere outside London, this had driven rental growth up significantly.
BFS completes £2.5m re-development deal
The lender is providing the loan to Starship Group to finance the acquisition of the land and all associated build costs.
It is the fifth team the pair have worked together, with plans secured to demolish the former surgery in Heswall, Wirral and replace it with nine apartments (pictured).
It is estimated the development will be worth around £3.1m once completed, which is expected to be in the spring.
BFS managing director Steve Barber said: “We have completed a number of deals with this client in the past and have huge confidence in their knowledge, understanding and capabilities.
“We were able to take an independent view on their borrowing request and have agreed to finance the entire deal.
“The site is in a great location, very close to the town centre and the apartments are designed to a particularly high specification offering strong returns on investment.”
A Starship Group spokesperson added: “We have built a solid working relationship with BFS over many years. We regard them as our partner and an extension of the wider team.
“We collaborate with them at the very beginning and value their insight and input. They offer sound advice and present viable solutions to the most complex of financial challenges.
“This is a great scheme and we now have all the foundations in place to get things moving in terms of construction in the weeks ahead.”
BFS has also added Anne Gullon to its sales team as she takes on the role of business development manager in Yorkshire and the North East.
Gullon has more than 20 years’ experience in the industry working in business development roles for lenders and finance brokerages.
“A well-known figure across both regions, Anne will introduce the firm to existing contacts while strengthening the brand amongst new potential clients,” BFS said.
Redwood Bank appoints BDM from Together
Mann (pictured) has more than 23 years’ experience in the industry and was most recently corporate relationship director at Together, where she been since April 2019.
She has previously worked for Santander and was a manager of client relations at the Royal Bank of Scotland during her 18 years working for high street banks.
Gary Wilkinson, CEO and co-founder of Redwood Bank, said: “Sonia’s track record with previous banks is impressive. She has proven she’s more than capable of delivering fantastic customer service.
“In order to meet increased demand, we are keen to recruit new BDMs who have experience in building, and then managing strong relationships with, a portfolio of commercial clients. When we met Sonia, she fitted the bill perfectly.
“Sonia’s appointment also further demonstrates our commitment to the Women in Finance Charter, which encourages financial services to provide a balanced workforce across gender.
“We’re very passionate about accelerating gender equality and we feel we’re certainly moving in the right direction when it comes to further diversifying the make-up of our staff workforce,” he added.
HTB stops accepting applications to beat stamp duty deadline
The lender has been warning borrowers it could not guarantee completion by the cutoff for some time and has now announced the policy change formally.
Mainstream lenders have been warning brokers and customers about the deadline for several weeks, and today conveyancer trade bodies called for an urgent extension as they warned completions were becoming a ‘lottery’.
In October, participants in a Brightstar video debate suggested mid-January would be the likely point where buy-to-let specialist lenders could no longer guarantee completion before March 31.
HTB commercial director Alex Upton (pictured) said: “We have taken this decision to allow our broker partners to plan ahead with their clients and to manage expectations accordingly.
“We have been saying for some time that we cannot guarantee completion by the end of March 2021, however we feel it is now the right time to take this a step further.”
Upton added that it was not an easy decision.
“Typically, around 25 per cent of deals complete within three months of us receiving an application so from a ‘getting the most amount of assets on the books’ point of view, it would be better for us to keep going,” she continued.
“However, it would be unfair of us to put our brokers and their clients into a completion lottery. We are committed to being fair and transparent.
“Of course, we are still offering our full range of lending options and solutions,” she added.