• Over 14,500 loans completed in buy-to-let, residential and bridging to date
• Exceptional asset quality
• New mortgage lending forecast at £1.5 billion for 2015, up 114% on 2014
• Over 32,000 savings accounts opened at Charter Savings Bank in just 8 months since launch
• Savings customers have deposited £1.4 billion
Charter Court Financial Services Limited (Charter Court), the specialist challenger bank and owner of Precise Mortgages and Charter Savings Bank, today announces it passed through £2.5 billion of mortgage completions to the end of October 2015, helping over 14,500 buy to let landlords and home owners achieve their property ambitions.
New mortgage lending in 2015 is forecast to grow to c£1.5 billion, an increase of 114% vs. 2014. This has been driven by strong growth in core lending markets, competitive product rates and the current mix of stable economic conditions, rising real incomes, improving housing equity positions, and modest expectations of interest rate increases. Buy-to-let lending represents the largest sector, accounting for approximately 62% of Charter Court’s total lending. The remaining 38% of lending includes residential home owners, many of whom – such as the self-employed – are not well served by high street lenders.
Charter Court has just eight mortgage loans where there are three or more payments in arrears – this equates to an arrears rate of 0.07%*, and reflects strong lending controls and underwriting criteria. The CML mortgage industry average arrears rate is 1.19%**.
Charter Savings Bank, which has regularly been featured in the best buy tables since it opened for business in March 2015, has already opened over 32,000 savings accounts, in which customers have deposited £1.4 billion.
Ian Lonergan, CEO of Charter Court Financial Services Limited said: “Passing £2.5bn in cumulative lending and attracting £1.4bn of savings balances is a major milestone for the business. Along with other challenger banks of a similar scale, we are bringing a new level of choice and service to customers who are disillusioned with high street banks. Our loan performance and service levels remain very strong due to the investment the business has made in excellent people and a scalable infrastructure.”
*arrears rate based on mortgages as at month end September 2015.
** CML mortgages >3 months in arrears at end of Q2 2015.
In a recent conversation with Gareth Lewis, our Head of Bridging, and Chris Parr, our National Sales Manager, they talked me through a recently published article about why bridging loans remind us of Marmite’s famous slogan – You either love it or hate it.
Take a look at Chris’s thoughts below...
Bridging loans... Some brokers have embraced the concept and product, whilst others have steered clear. You can then add into the mix, those brokers who have had a bad experience and got caught out with hidden exit fees, for example.
The bridging market should be a genuine consideration for a commercial broker and its customers. Fees and costs are more transparent than ever before, exit fees are charged by the few and not the many, and because interest is charged by the day and not by the month, transactions are more commercially viable for both the broker and the customer.
Why should you consider a bridging loan for your customer?
A regular comment from brokers is that they just aren’t asked about bridging loans. This doesn’t surprise us, because a customer may not be as well versed with the fundamentals of a bridging loan as we are. But it does make me wonder how many times a bridge has been missed as a viable option.
For example, if you have a landlord looking to buy or renovate a property to rent, chances are they will contact you for a long term loan. They may not understand that a long term loan may not be funded until the renovation works etc. have been completed, and the property is in a rentable condition.
This would be a perfect opportunity to educate the customer about how a bridging loan can help. If structured correctly, this would allow the landlord to acquire a long term loan for the property with a stronger product and a higher loan amount. Take a look at the scenario below which utilises the light refurbishment product offered by Precise Mortgages.
An experienced property landlord wants to acquire a property that needs refurbishment. The property had been occupied for a number of years by an elderly lady and requires a full modernisation to become suitable for rent. Work on the property includes a new kitchen, bathroom, windows and complete overhaul of the central heating system.
The current state of play
The customer has budgeted £15,000 for the refurbishment and estimates that all works should take 6-8 weeks to complete. A purchase price of £110,000 has been agreed although comparable evidence suggests that properties within the area are selling for over £150,000.
The customer has the finances to cover the cost of the conversion, but this will leave him without the money for a deposit. As a landlord, the customer has built up a good sized property portfolio over a long period of time. Like many investors, his portfolio is geared to the maximum LTV. However, he also has a main residence valued at £250,000, with a £100,000 mortgage outstanding.
· 70% LTV bridging loan against the property for purchase
· A second charge loan against his main residence to cover the deposit and roll up of interest and fees to cover terms of 4 months
What happens once the refurbishment is complete?
The majority of buy-to-let (BTL) lenders still have the 6 month rule of ownership before the customer is able to remortgage. Precise Mortgages is able to let customers remortgage from one of our bridging loans to any of our BTL products the customer qualifies for upon completion of the works - although they may not have owned the property for 6 months. So, if a customer qualifies for the 80% LTV BTL and the valuation after the completed refurbishment is confirmed at £150,000, he can remortgage within 6 months for £120,000, which will cover the repayment of the initial bridging loan, fees and interest borrowed.
The sense behind the solution
By adding a bridging loan to the solution, a customer will be able to achieve his aim of purchasing the property, carrying out the works and acquiring a BTL mortgage. His aspiration to grow his portfolio will be met, and he will also learn how to continue expanding his portfolio by using a minimum cash outlay.
Add to that mix the fact that Precise Mortgages will allow customers a maximum of 5 BTL mortgages, and the customer also has the opportunity to develop his portfolio with us further if he wishes. I think you’ll agree that it makes a lot of sense – and quite unlike Marmite – I’m sure you will all love it!
Just 12% of UK adults* believe access to mortgages has improved in the past five years, but not enough, despite recent moves to open up the mortgage market. In similar research commissioned by Precise Mortgages last year, 29% of adults believed that access to mortgages had improved, but not enough**, marking a considerable drop of 17% from a year ago. The new findings from Precise Mortgages, are part of the 2015 Mortgage Voice report in conjunction with YouGov.
Despite this negative sentiment, the report witnessed improvement in some of the wider issues facing homeowners. Over the last year UK renters, in general, see saving for a deposit (51%), finding an affordable property (41%), and getting a mortgage approved (33%) less of an barrier to owning their own home than in 2014.
However, 49% of UK adults believe that mortgage rates only favour those with large deposits and 36% feel that mortgages are too difficult to obtain for first time buyers. With 76% of renters aged between 18 and 24, seeing saving enough for a deposit as a barrier to owning their own home, and 67% say finding an affordable property is a barrier. With the average cost of a property now upward of £200,000 and house price inflation set to hit 6% this year, affordability is likely to remain a challenge for first time buyers.
Despite an uphill battle, 41% of those renting aged 18 - 24 still hope to own their own home in the next five years. However, amongst the older demographic the situation differs, with only 14% of renters aged 45 – 54 planning to own a property in the next five years, with the majority (67%) instead, having no aspirations to be a home owner.
Alan Cleary, Managing Director of Precise Mortgages, said: “Prospective homebuyers are feeling more positive about their ability to save and find an affordable property, but with consumer sentiment towards mortgage accessibility falling in the last year, the industry has a vital job to do in reassuring prospective homeowners. The mortgage industry should serve prospective homebuyers, and we must dispel the belief that lenders continue to favour large deposits and are unforgiving of those with blemishes on their credit record.”
“There are specialist lenders in the market ideally placed to help navigate the obstacles potential homebuyers face, but there is still more to be done across the wider industry. Ensuring that all viable homeowners have access to mortgage products should be the aim of the industry as a whole.”
Precise Mortgages recently improved its new build lending policy to give those left unserved by mainstream lenders a greater chance of securing the mortgage they need to purchase a new property.
Getting housing policy correct is a complicated task but it is important that buy-to-let does not become a political football
A lot can happen in a month and, since I wrote my previous column, the political landscape in the UK has fundamentally shifted. Have no doubt – this will significantly impact the housing and mortgage market.
Jeremy Corbyn won a landslide election to become the opposition leader and, with it, the Labour Party has lurched to the left.
This has given the Conservatives a chance to move in a similar direction and potentially win votes they would not normally have a hope of winning. The opportunity has not been lost on the party and we can already see the centre ground being taken with the introduction of new policies on the minimum wage and first-time buyers, and the promise of an assault on poverty.
At the same time, buy-to-let landlords have received a rather less positive message in that they will have to deal with an increase in taxation on their rental property profits, as well as the Financial Policy Committee pursuing powers of direction over the market, to which the Chancellor has given his tacit approval.
It is difficult at this stage to figure out whether these changes are a calculated political move on landlords, who are likely to vote Tory come what may.
Is it a populist move reacting to the negative media coverage of buy-to-let landlords over the past few years, blaming them for rising house prices and the plight of first-time buyers?
Or is it purely a move to protect the financial stability of the economy, as described by Bank of England governor Mark Carney?
Only time will tell. In the meantime, the industry should be focused on ensuring policymakers have all the facts at hand so that the correct decisions can be made and the law of unintended consequences does not overwhelm the good intentions.
Some would argue there has been substantial growth in the buy-to-let mortgage market over the past few years. Indeed, when you look at the percentage growth, there is no doubt it has grown much more quickly than residential mortgage lending, for example.
However, on an absolute basis, the buy-to-let mortgage market this year will be significantly smaller than it was in 2006 and only marginally bigger than it was 10 years ago.
Is the buy-to-let market being driven by lender appetite or by consumer demand?
The answer to that is obvious. The UK population has grown considerably over the past 10 years so more housing stock is needed. At the same time, it has become much more difficult for first-time buyers to get on the property ladder, meaning people are renting for longer.
Many hold the view that landlords have not only provided additional rental stock but have also significantly improved its quality. We can clearly see social housing stock has been in decline for more than a generation and it is also pretty clear private landlords have plugged some of the gap.
If landlords are disincentivised or curtailed in some way, we may end up with less supply of private rental property. Considering we are without a mechanism to replace that supply, this would not seem logical in a market with rising demand.
The changes to planning permission that allow housebuilders to sell their affordable stock instead of renting it out may also reduce the supply of rental property.
I appreciate that getting our housing policy correct is a very complicated task. However, I am keen to see that the buy-to-let market does not become a political football and that the FPC consultation is fully furnished with the facts so that we continue to have a market that meets the needs of all stakeholders.