Alongside branching into the new product areas it is aiming to grow its bridging lending to around £100m having already surpassed its £35m target for 2018.
It warned that some of the lending being conducted within the sector is “scary” and “toxic” with the problem appearing to get worse.
The lender is also planning a base to cover the south west of England and south Wales, while it hopes to do further lending in the north of England and potentially Scotland.
Glenhawk CEO Guy Harrington told Specialist Lending Solutions the lender was very close to making the move having already hired key compliance staff.
“We expect to be FCA regulated by Q1 2019 where we will then be able to offer a full suite of additional products,” he said.
“Not just regulated bridging but term products, buy to let, homeowner, end of life products – we’re quite keen to get into those and there’s a few other things in pipeline we’re considering.
“It’s quite a hard sector to innovate in but our key focus is to speed up processes on our side and put our spin on it so we are competing against the big guys,” he added.
High street and airspace
Harrington admits that it might seem a bad time to go into buy to let, but suggests the current turmoil creates opportunities for new entrants.
The high street and commercial spaces are another key target market and area of interest for Glenhawk.
“We see opportunities in the high street in re-purposing retail units, whether it’s for residential or change of use in commercial or to renovate,” he continued.
“We’re looking at how we can package a product at the high street that appeals to retailers and how it can help them. We’re very open to developing new ideas in here.”
And the potential for upwards permitted development rights as proposed in last week’s Budget also excites Harrington.
“We get a lot of airspace enquiries but won’t touch them yet because of planning, leasehold and freeholder risk issues, but if the government does make it permitted development we’ll happily back those deals because it lowers our risks,” he said.
Cautious, defensive lending
The plans all sound very grand for a lender which has barely been active for a year, but Harrington insists this is a conservative, realistic push to grow the business in a sustainable way.
With funding secured for the future expansion and loan redemptions coming back in from previous lending, he believes this shows the lender is building a healthy track record.
“We had £60m in originations last month with conversion rates around 10%, and we’ll comfortably hit £6m, maybe a little more,” he said.
“We lend quite defensively, we’re quite cautious in what we lend on bearing in mind what the economy is going into next year.
“So we’ve positioned ourselves with relatively low loan to values across the book and strong assets,” he added.
Its a retail product
Like many in the industry Harrington has real concerns with the way some lenders are operating.
One of those issues is high fees to do almost any part of the process.
“We’re not charging admin fees, commitment fees, exit fees, early repayment fees and all these things which stop people wanting to take out bridging loans,” he said.
“People looking to coming in as lenders will ask how we can run the business without all these fees upfront and to exit?
“Those days are gone, this feels like a retail product now. I’ve noticed two or three more recently who were going to launch who’ve decided they can’t do it because of the market competitors,” he added.
Scary, toxic lending
And Harrington also highlights some of the “scary” and “toxic” high risk lending practices going on in the market, singling out the peer-to-peer (P2P) market for significant criticism.
“We regularly see deals that we say no to. When you get lenders recklessly lending against a value to please the borrower not the market or surveyor’s Red Book value, you get issues,” he said.
“A lot of lenders have been pushing it too far, for example P2P. It’s a great place for lenders to park toxic assets on people who don’t know where their money’s gone which isn’t fair.
“We’ve had deals come to us which their borrowers have defaulted on, we’ve been asked to bail them out and every time we’ve said no because as a rule of thumb we don’t bridge a bridge,” he added.
And it seems the situation in this part of the market may be getting worse.
“We’ve had a number of P2P loans that have gone wrong come to us and in increasing numbers – it’s quite scary from our point of view, especially the parameters they are lending on,” he said.
“It’s off in-house valuations, all assumptions and it does scare me a bit but it’s also a relief that I didn’t get into it a few years ago when we looked at it.”
He added: “Yes you can charge 1.5% per month but you are going to get the worst possible deals, worst borrowers, worst properties and there’s always something that will be a big risk.
“It’s not a market we play in but it is what the P2P lenders play in.”
Capital market funding
One thing fuelling Glenhawk and many other specialist lenders’ growth is the availability of capital from institutional funders – and its seems unlikely this will slow down anytime soon.
Due to their own capital constraints, banks are instead putting lending out through third party lenders, and Harrington expects this to grow further.
“Once a week we get an approach from a challenger bank or a pension fund or any other funding institution wanting to back us because they just can’t do it themselves,” he said.
“I can see some opportunity from the digital banks, such as Mondo, Revolut and a couple of others.
They are sat on quite hefty chunks of savers’ money and with a lack of investment banking and ring fencing they can’t really do much, so I can see them thinking they need to deploy that,” he added.