Castle Trust offers short-term finance, second-charge loans, complex buy-to-let products and development finance.
The distributor said it has ‘rapid growth plans’ in place for 2020 which have been kicked off with its expansion into the North of England with the appointment of Simon Bancroft.
Meanwhile, Foundation Home Loans has partnered with packager firm, The Mortgage Trading Company.
The Mortgage Trading Company will have access to Foundation’s range of buy-to-let mortgage products including solutions for portfolio and limited company applicants.
Based in Leeds, The Mortgage Trading Company works with lenders in order to provide solutions for advisers’ more complex mortgage enquiries.
The Mortgage Trading Company also packages residential, second-charge, commercial and bridging finance deals.
Earlier this month, Foundation cut rates by up to 20 basis points on its individual and limited company fixed-rate product range for both single tenancy properties, as well as large HMOs and short-term lets.
He will take up his appointment later this year reporting to Alex Upton as she moves up to her new role as commercial director, Specialist Mortgages Division.
Dussard (pictured) was formally the sales director at Castle Trust, a position he held for two years. In total, he had been with the lender for seven years, starting as the co-head of intermediary distribution in the investments department, before being made a business development manager in 2013.
Charles McDowell, managing director, Specialist Mortgages, said: “Frankly, Marcus is a rainmaker within the specialist mortgage market and I’m thrilled that we’ve been able to secure his talents. He will add further momentum to a business which is already growing exponentially.
“Talent attracts talent and our vision is to be a magnet for the very best within the industry. When I look across our mortgages division, I’m proud to lead a team of specialists unrivalled in their capabilities.”
Dussard added: “The industry has really started to sit up and take notice of HTB and the impact it is having on the specialist market. The opportunity to work in a team which combines energetic, intelligent leadership, a compelling proposition and exceptional people is hard to resist.
“I’m looking forward to getting stuck in as part of this high performing team and being part of the next exciting stage in HTB’s development plan.”
The new rates are a three-year residential fixed at 90 per cent loan to value (LTV) at the two-year rate of 2.13 per cent, reduced from 2.4 per cent, with no product fee. As well, the buy-to-let three-year fixed rate at 75 per cent LTV matches the two-year fixed rate of 1.56 per cent, down from 2.09 per cent, with a £1,995 fee.
The residential rate reductions include a new intermediary exclusive five-year fix at 1.49 per cent at 65 per cent LTV with a £1,495 fee. The deal offers £300 cashback for purchasers while remortgage customers will receive free valuation and legal fees.
Furthermore, the three-year fixed rate up to 85 per cent LTV has been reduced to 2.13 per cent, cut from 2.31 per cent, with no product fee. The five-year fixed rate up to 90 per cent LTV and no product fee has been reduced from 2.4 per cent to 2.34 per cent.
Virgin Money’s shared ownership two-year fixed rate up to 95 per cent LTV has seen a cut to 3.27 per cent from 3.54 per cent and has no product fee.
Its seven, 10 and 15-year fixed rate ranges have been simplified to LTV rates of 65 per cent and 90 per cent with the 90 per cent LTV tier now reflecting the original 75 per cent LTV rates.
Selected Help To Buy equity loans at 55 per cent and 75 per cent LTV rates have been reduced by up to 0.40 per cent.
The buy-to-let changes include a two-year fix up to 80 per cent LTV reduced from 3.3 per cent to 3.25 per cent with a £995 fee. The three-year fix, up to 60 per cent LTV, has been cut from 1.74 per cent to 1.56 per cent with a £1,995 fee.
Selected five-year fixed rate 60 to 80 per cent LTV products were reduced by up to 0.15 per cent.
Andrew Asaam (pictured), head of mortgages for Virgin Money, said: “We’re delighted to launch these special offers and hope they will help more customers.
“By launching the new ‘three for two’ rates we’re offering customers an extra year’s peace of mind for no additional cost.”
Castle Trust launches 10-year term loan
Castle Trust has launched TermTen, a ten-year term loan that is fixed for five years before reverting to a standard variable rate (SVR).
This is longer than the bridging lender’s typical loan term of five years and the product reverts to a rate of 6.49 per cent, different to Castle Trust’s SVR rate of 5.99 per cent.
Annualised rates on TermTen start at 4.49 per cent and there are no early repayment charges (ERCs) after the fixed five years. The product comes with serviced interest and a maximum LTV of 75 per cent although the lender does offer 80 per cent for loans of £500,000 or less.
The minimum loan size on TermTen is £50,000 and the maximum loan size is £15m.
The loans are available for holiday lets, multiple properties on a single title, student lets, portfolio loans and property refurbishment.
Marcus Dussard, sales director at Castle Trust, said: “We have seen increasing demand from property investors for loans that deliver the flexibility and lending appetite of traditional bridging, but with longer terms to provide peace of mind.
“The market is changing, and while there remain plenty of opportunities for investors, those opportunities tend to be longer term – with a flat property market and stagnant house prices providing little for short-term investors to get excited about.
Dussard said TermTen had been developed as a direct response to the increased demand to offer investors the safety of a ten-year term while also giving them the flexibility to refinance penalty-free after five years.
He said: “We will also be able to provide an exit to the loan, to provide clients with multiple options throughout the ten-year term.”
The client built a block of flats using a development finance loan which was due for redemption, but a deal to sell off some of the units to a housing association had been delayed.
There was also an ongoing legal dispute, which needed to be resolved prior to completion on the loan.
Brightstar turned to Castle Trust, which structured the deal as two simultaneous bridging loans ‒ one with interest serviced on a monthly basis, and the other with the interest rolled up. This means the client is able to manage their cash flow until the sales go through.
Rob Jupp (pictured), group CEO of Brightstar Financial, said that the case was an example of how working with the right partner can make a deal which seems impossible completely achievable.
He continued: “Our relationship with the lender meant we were able to work together to structure a loan with a high exposure that took legal charge over the entire development and secured funding on a high loan to value against the block value of the site. This demonstrates the value of great partnerships.”
Barry Searle, managing director of mortgages at Castle Trust, said the case showed the value of working with specialists that understand the market and how to structure solutions.
He added: “The client faced a real problem, but we were able to work together with Brightstar to get them out of a hole and deliver a solution that will help them to achieve a successful result to their development.”
Adkin (pictured) has more than 16 years’ experience in specialist mortgages including Preferred Mortgages, Platform Home Loans and GE Money. More recently, he was a BDM for Zephyr Home Loans and a corporate account manager at Foundation Home Loans.
He will help brokers working in the south east to place bridging, complex buy to let, development exit loans and business loans and high net worth mortgages.
Marcus Dussard, sales director at Castle Trust, said: “At Castle Trust, we offer bespoke loans to match client requirements and we understand how important it is for brokers to have a conversation with a lender about a case.
“This is why we put so much emphasis on investing in a market leading business development team. James has real pedigree in specialist lending, and I look forward to working with him as the latest addition to our expert and dedicated team.”
A Castle Trust spokesman told Specialist Lending Solutions that it was monitoring the situation and that brokers should contact it directly if they had any questions or concerns.
“We take fraud extremely seriously,” the spokesman said.
“Through our usual checks, we identified a website set up by fraudsters in the name of Castle Trust Private Bank. This was a scam tactic and has no connection whatsoever with Castle Trust.
“We recommend that intermediaries do not click on any links that reference Castle Trust Private Bank and check that they are visiting our correct website address, which is www.castletrust.co.uk. Alternatively, intermediaries can call us directly on 0345 241 3079.”
FCA warning
The Financial Conduct Authority (FCA) is also aware of the situation and issued a notice that Castle Trust had been cloned by the scammers apparently based in Amsterdam in the Netherlands.
Fraudsters have used the name Castle Trust Private Bank along with the website https://castle-trustprivatebank.com, which is still live at time of publishing, as part of the tactic to scam people, the FCA said.
This clone firm is not authorised or registered by the FCA but claims to have authorisation.
And the regulator emphasised that the authorised firm Castle Trust Capital PLC has no association with the ‘clone firm’.
It is the second specialist lender to be targeted by fraudsters in the last month after Shawbrook and its customers were the subject of cloned, fake promotions.
Whitfield joined the lender in April and will lead Castle Trust’s renewed focus on growing its share of the development market and increasing lending.
His previous experience includes Wellesley Group, Co-operative Bank and UK Export Finance.
The new proposition is available to individuals, special purpose vehicles (SPVs) and limited companies at up to 70 per cent gross development value (GDV) on day one.
Loan sizes are available from £1m to £10m and terms are available between nine months and 30 months.
The lender said every case will be supported by a dedicated team for the full term of the loan, with expertise available throughout the build.
Three key questions
Simon Whitfield, head of development finance at Castle Trust (pictured) said that despite the political and economic uncertainty it had a real appetite to lend.
“On every case we will ask three simple questions,” he said.
“Has the developer completed at least two similar schemes in the past? Does the developer have cash in the deal? And is buy-to-let a realistic exit for the development?”
He added if the answer to all three of these was yes, then the lender was keen to help.
Managing director of mortgages Barry Searle added that he believed there were huge opportunities for developers to meet the increasing demand for housing through new schemes and conversions.
“We believe this market is set for long-term growth, which is why we have taken our foot off of the gas in recent months to restructure our team and deliver intermediaries with a proposition that we can commit to for the long term,” he said.
“As part of this commitment we want to build long-term partnerships with brokers and their clients to provide reliable and sustainable finance to experienced developers.
“I’m really pleased that Simon has joined the team to help us achieve this. He has great experience and I know that he can’t wait to get started.”
While the reasons given to the broker and borrower for the decline may not refer to margin, the late stage of refusal could suggest funder concerns over profitability.
“There’s a lot of competition for fewer deals. Lenders try not to come too far down the risk curve and at the same time to drop pricing because it’s counter-productive,” said Marcus Dussard, sales director of Castle Trust.
Castle Trust, which is hoping to secure its banking licence by early 2022, is currently funded using an investment bonds model. It has picked up specialist deals in some cases where lenders that had agreed in principle unexpectedly pulled back at the last minute.
“We’re finding that deals come to us when it’s already gone through the valuation and other hoops, and then it hits a layer where it it’s a ‘no’,” said Dussard.
“It seems to us that it’s so far down the line, that it’s more to do with funding issues than anything else,” he said.
One interpretation is that the market is so soft that pricing is sagging too low for some funders to tolerate in large volumes. Additionally, price wars among larger lenders in the mainstream market could be spilling over into specialist lending.
“We’ve seen some lenders withdraw from the market, which is sad for their staff, but it does appear to be a trend that could continue. We’re finding a distinct race to the bottom on price. As long as that continues and it’s constantly pushing against the profit line, then there is less room to be able to continue to do that,” Dussard said.
Classic greed versus fear trade-off
“We’ve seen more issues recently with lenders where funding lines in the background are dictating some of the credit policy. The lender has a product and is using funding lines from other institutions and sometimes the tail is wagging the dog. The funder in the background can have an impact on the credit policy of the lender at the front end,” said Robert Collins, co-founder finance brokers Sirius Finance (pictured).
“I’ve had a couple in the past year or so where terms were agreed, it’s gone to legals and then the lender’s gone to their funding line and for whatever reason they don’t rubber stamp it. The wholesale funder doesn’t give carte blanche to the lender and their input becomes an issue on some of the credits.
“The past year or two a lot of new lenders have come to market with a lot of different funding sources behind them. Sometimes the expectations of what the market is and what the returns are going to be – versus what the actual market is like with the competition that’s out there – are mismatched on what returns they are going to get for the credit profiles. The expectations can be two or three years behind, on what they thought they could charge and what sort of interest rates they could achieve. There is pressure on pricing. It’s the classic greed and fear trade-off, and a few times the fear is winning over,” Collins said.
A number of lenders have pulled out of the mainstream and specialist mortgages markets over the past year.
Tesco Bank closed to new business in June and has put its back book on the market. Specialist lender Magellan Home loans closed to new business in March, citing competition, low interest rates and rising credit risk.
Fleet Mortgages withdrew its range of buy-to-let mortgages in January after it reached the ceiling on its funding line and returned to the market in April, having secured a new line.
Octopus paused buy-to-let lending in November 2018, having “filled our allocated budget for residential and commercial term loan products well ahead of schedule”, after becoming “inundated with deals”.
Concentration risk
Even so, Charles McDowell, managing director of specialist mortgages at Hampshire Trust Bank, interpreted the trend for late-hour refusals differently. He said that often when deal-making, “information comes to the fore, about the property or the borrower, that wasn’t known about before.”
He added that the challenge for lenders was more about “concentration risk” than about profitability levels.
“More likely it is that smaller, specialist lenders have a concentration risk level beyond which they don’t want to lend to a single customer. This could cap deals at a level of £15m, £20m or £25m.”
McDowell continued: “Even though the transaction is really solid, it’s a good property and borrower, the issue with concentration risk is that if something untoward happens, a random freak event, suddenly you can end up losing an awful lot of money. That’s why lenders mitigate by entering a syndicated deal.”
HBT this month supplied £9.8m as part of a £23.7m syndicated loan on a large residential scheme in Leeds.
“It’s not about margins. Margins continue to be fairly healthy, as they are not under the same pressure that the smaller ticket, more vanilla transactions are,” he said.
“It’s an interesting market at the moment. It’s a challenging market but it shows that there are cracking developers out there, cracking borrowers out there with fantastic properties. Providing that lenders are able to step up to the plate in terms of being innovative and agile there is business to be won at good margins that work for everyone.”
Sirius Property Finance secured a £12m loan from Castle Trust against a complex London portfolio in the space of 11 working days.
Meanwhile Hampshire Trust Bank (HTB) formed and swiftly completed a £23.7m complex syndicated loan for a large property near Leeds. The deal was brokered by Newsource Commercial Finance.
The syndicated loan comprised £9.8m from HTB and £13.9m from another lender, each refinancing two blocks, at 75 per cent loan-to-value. The transaction enabled full repayment to the existing funder.
“Speed and co-operation were paramount in this extremely complicated syndicated deal. HTB had both the hunger and capability to deliver and were extremely constructive throughout,” said Newsource Commercial Finance director Brian Walters.
HTB specialist mortgages sales director Alex Searle said: “Both teams turned the proposal around swiftly, supported by a very efficient legal process with open dialogue between all sides.”
London deal
The deal brokered by Sirius Property Finance refinanced multiple units in North London whose existing loan had passed its maturity date and was incurring penalties.
The broker liaised with lender Castle Trust to approve and process the loan.
“This is an excellent example of what can be achieved with the expertise and relationships to balance the needs of lender and borrower and to create a deal that works for both sides,” said Sirius co-founder Nicholas Christofi (pictured).
“We rolled up our sleeves, spoke to our contacts and presented a case that was approved by Castle Trust – which reflected our urgency and determination – in two days flat. Not many lenders can process and agree such a large, complex case in such a short time-frame,” Christofi added.
Marcus Dussard, sales director at Castle Trust said: “We’ve noticed a trend of lenders pulling back from deals they have agreed in principle, particularly for large or more complex loans. Our flat decision-making structure and focus on complex cases that enabled a rapid solution.”
