Round-table
borrower the full amount even when they only need finance for part of the term – will this become a thing of the past as other lenders get more flexible?
you as a lender to manage that loan book from start to finish. You’re not going to take the unwanted risk of increasing your LtVs to chase the deal. CG: Securitisation cannot exist in the short-term world. the gestation period for a case is six months. GB: We have a conduit securitisation which is unique and covers all of our different types of lending but we don’t have a securitisation just for bridging loans. SN: but what happens when the hedge funders come in and start spending? because they’re not going to put in £100m, it’ll be £500m. You’ll then be put under pressure to lend it all because you don’t want it taken away. At some point you’ll be chasing clients who aren’t there and then you’ll have to become more flexible in your criteria.
Some lenders offer fixed terms because their funding obligations mean they have to charge the
SN: We don’t have a minimum term. if they just want it for a week that’s fine but they’ll still pay for the month. GL: i think the lenders with minimum periods of one month are few and far between. MG: Any unused portion of interest is refunded to the day for Omni. GL: Most lenders will charge by the day so long as they pay the one month minimum. CG: On a residential term mortgage a lender can have a good return of investment over a seven year period. it’s important to remember a bridging lender’s average return of investment is six months. everything is priced according to risks and we’re in it to make money.
Given the changing borrower profile coupled with the 45p rate of income tax there’s been an explosion in the number of deals written through offshore trusts and special purpose vehicles. Are there any concerns about this? And what is the impact of the clampdown on stamp duty avoidance?
SN: it should make things easier for us. if they discourage off-shore trusts then it’s on-shore. the due diligence on an on-shore company is far easier to do as is all the trusts behind it. the more sophisticated the borrower, the more off-shore business there is. CG: A lot of high net worth applicants want their identity
hidden from general view so will set up a british Virgin islands SPV.
Are lenders getting more confident at structuring complex deals with layers of charges on different assets?
MS: Yes very much so. You see massive complex deals with cross charges and multiple properties. Lenders are getting very good at handling those types of deals because they’re keen to lend and if it fits and they can take the right of security and the exit is setup, they’ll take it on. SN: Also a high street bank couldn’t. they couldn’t get their head around it. GB: this isn’t a new thing to do though to cross-charge or secure multiple assets. GL: Also just because it’s a more complex structure for a deal doesn’t mean it’s not vanilla. SN: Also you underwrite to exit so if it works, you’re just following the same basic principles.
How does it affect the risk for the lender if it’s secured over several properties?
GB: i presume it’ll reduce risk because you’ve spread it around.
Do you think the fact that there’s a little more appetite in mainstream buy-to-let is driving that?
GB: Yes naturally but you’ve also got the economic changes as well. People are asset rich who need cash flow and need to be cross-purposed across industrial units or the home. GL: brokers and introducers have
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