opened the eyes of some buy-to-let investors as well. When we did our Yougov poll at the back end of last year the average LtV on a buy-to- let portfolio was 39%. effectively they’re sitting on hard equity there which is cash. A broker who looks at them and sees that they’re 1% over base, why don’t they strip that equity out and re-structure a second charge over multiple properties to pull equity out and be a cash-buyer in an auction? it’s us as well; we’re enlightening the broker too. if you’ve got a cash cow there then pull that equity out and make them go out and buy other properties and build a portfolio. CG: that’s why revolving credit facilities are such a winner in the current climate. You’ve got so many property speculators out there who want a hunting licence and nick property out of auction conditions, distressed sales, LPA receivership purchases etc.
How much of that goes on?
CG: We’ve got a particular revolver product that works extremely well. How do you underwrite that?
CG: it’s based on their current assets so all underwriting, legal, valuation and all due diligence is carried out on their current portfolio stock. it’s then a revolving credit facility which they can draw down within 24 to 48 hours to buy new property. because they can draw down so quickly is due to the fact they can carry out the due diligence, valuation etc. We’re not interested in securing it against the
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property they’re buying. MG: We’re finding that cross- collateralisation just adds a different dimension to things. We’re seeing it for business purposes as well. When you talk about bridging transactions you see a lot of high net worth individuals who have a number of different properties at low LtV first charges and residential investment mortgages. You also get funding on a second charge basis for business purposes because they can’t go to a bank for a significant overdraft like in the past.
Various lenders have indicated an appetite to lend for up to three years in the bridging market – what’s driving this when there are buy-to-let products already in this space?
GL: it’s not a bridge. CG: Someone’s got to make it clear it’s not a bridge. One day to 12
months is your typical bridge. MG: to be fair i think it indicates that there is a finite appetite in the existing buy-to-let market. it’s not a bridge but it is tapping into the fact that there is pressure on funding in the existing sector and anyone operating in that market is able to charge higher rates with business on that basis but i definitely agree that it’s not a bridge. SN: the 3-year products are much cheaper than bridging products as well. it’s not sustainable for a client to have a 3-year at 15% or 16%. MF: there are a number of small scale developments and residential refurbishments that will comfortably bleed into 24 months and if someone is looking for a facility to refinance that product and they can only get 12 months then it takes them out of that market. i think that 3-year product has multiple uses.
So it’s more development finance on a longer term?
GL: there are two guises to that. One is a commercial proposition which you’re looking at a heavy refurb product and then you’ve got the medium term buy-to-let which is a higher rate profile than standard buy-to-let but is there for a rationale because they can’t get a buy-to-let for some reason. MF: there is a prolific buy-to- let provider that won’t consider lending to someone who doesn’t have buy-to-let properties already for example. they want to see that they’re not taking on the uninitiated and i think this would be the perfect product for them.
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