InterBay takes yield approach to semi and commercial pricing

The specialist lender, which is part of OneSavings Bank, is now basing prices in the range on yield. It has introduced three tiers: tier one, up to 7% yield, tier two, 7 to 8.5% and tier three is for yields above 8.5%. It has also reduced its loan-to-value (LTV) bands to three: 55%, 65% and 75%.

The lower the yield, the higher the quality of the property because it is more expensive. A high-yielding property is seen as a greater risk to the lender because it was cheap to buy and therefore likely to be in a less desirable area and will experience less capital growth in future.

The move aims to align loan pricing with asset quality and replaces the previous prime/standard categorisation. Yields will be calculated by dividing market rent by market value (based on vacant possession).

Darrell Walker, head of sales for second charge and commercial at OneSavings Bank, said: “We’ve taken a fresh approach to the pricing of commercial and semi-commercial loans by rewarding a quality asset with pricing based on yield, even if the property is vacant.

“The adoption of this new pricing model and its simplicity reflects broker demand for more appropriate finance for better quality commercial and semi-commercial properties”.

Variable rates for the loans range from 4.14% above Libor for tier one properties at 55% LTV to 6.14% above Libor for Tier 3 properties at 75%. Borrowers can fix for three or five years by adding 0.1% or 0.2% to the rates respectively.

The 2-30 year loans are available to individuals, limited companies, LLPs, partnerships, trusts and pension schemes with good credit history. Properties such as heavy industrial, petrol stations religious property, hostels, bedsits, equestrian centres, public houses, agricultural properties, catteries, kennels, golf clubs, hospitals, mobile home parks, garden centres and telecoms masts are excluded.