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  • 04/05/2022 | Intermediaries News

    Castle Trust Bank recruits new BDM

    Castle Trust Bank has strengthened its property team with the appointment of Ashley Duhaney as BDM

    Castle Trust Bank has strengthened its Sales team with the recruitment of Ashley Duhaney as Business Development Manager for London and the South East.

    Ashley has more than a decade worth of experience in financial services, including roles in underwriting as well as business development. Most recently, he worked as a Senior Business Development Manager at One Savings Bank, where he was also an underwriter for the Interbay Commercial brand.

    Ashley will work with brokers in London and the South East, helping them to help their Buy to Let clients access the finance they need to explore new opportunities and maximise their returns.

    Rob Oliver, Sales Director at Castle Trust Bank, said: “We are delighted that Ashley has joined Castle Trust Bank to help us grow our business by working with brokers in London and the South East. With a background in underwriting, Ashley knows exactly what it takes to make a deal work and his experience will prove invaluable in helping brokers in the region to source and structure the finance that their clients need to make the most of the ongoing opportunities in specialist Buy to Let.”

    Ashley Duhaney, Business Development Manager for London and the South East at Castle Trust Bank, added: “In London and the South East, brokers need to work with a lender that can provide a combination of flexibility and certainty. Castle Trust Bank has an excellent reputation for doing just this – delivering innovative solutions to help property investors achieve their objectives. I’m looking forward to helping further build this reputation – working closely with brokers on structuring loans, delivering terms and raising awareness of Castle Trust Bank’s excellent proposition.”

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  • 04/04/2022 | Group News

    Our latest financial statements - September 2021

    Castle Trust has published its latest financial statement, as at 30 September 2021.

    Castle Trust Bank has published its latest financial statement, as at 30 September 2021. The full detail of the statement can be found in the FY 30 Sept 2021 CTB Financial Statements and you can download a copy of the following summary of Castle Trust Bank's Financial Strength here.

    The UK is still reshaping its economy following its withdrawal from the European Union and dealing with the consequences of the pandemic. Against this background of uncertainty, it is encouraging that Castle Trust Bank has delivered another increase in annual profit.

    The Group is strongly capitalised with total equity of £95.2 million, total assets of £666.5 million and liquid assets of £76.9 million. In the financial year to September 2021, Castle Trust Bank made a profit before tax of £3.6 million.

    Castle Trust Bank continues to enhance its ability to offer a greater range of services to both our savers and our borrowers. We are an award-winning provider of savings, mortgage and consumer lending products, employing over 200 people across our offices in Basingstoke and London. Our principal shareholder is the leading private equity firm J.C. Flowers & Co., which currently manages circa $5 billion in assets.

    Savings
    As at 30 September 2021, our c20,000 customers held just under £560 million of fixed term, fixed rate savings with us.

    Lending
    As at 30 September 2021, Castle Trust Bank’s total property finance loan book stood at over £398 million. The availability of the TermTen product which combines fixed rates and refinance options, and the Bridge to Let option which combines a bridging loan and TermTen into a single arrangement continue to prove very successful within the market.

    Retail Finance
    Working with over 2,200 partner retailers and 160,000 customers, as at 30 September 2021 the retail finance loan book for Omni Capital Retail Finance (‘Omni’) stood at over £165m.
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  • 15/03/2022 | Intermediaries News

    Don’t ignore the portfolio remortgage opportunity

    Rob Oliver, Sales Director, shares his thoughts on how to take advantage of the current portfolio remortgage opportunity.

    The buy-to-let remortgage opportunity has been well documented. According to data from UK Finance, there was £27bn worth of buy-to-let remortgaging in 2021 and it is expected to remain at this level in 2022. However, in 2023 UK Finance predicts that buy-to-let remortgaging will increase by more than 22% to £33bn.

    One of the drivers behind this opportunity is the wave of buy-to-let purchase business that took place at the beginning of 2016 ahead of the 3% increase in Stamp Duty Land Tax that April. Many landlords purchased those properties using a five-year fixed rate mortgage because of the benefits around stress testing and these deals have now lapsed, leaving landlords free to refinance their loan.

    Another driver is, of course, the rising interest rate environment. Inflation was already a serious issue ahead of the situation in Ukraine and now, with increasing fuel prices adding to the growing cost of living, there is certain to be increased pressure on the Bank of England to continue the interest rate rises it has already started. The cost of borrowing only looks like heading in one direction, so for any property investor planning on remortgaging, there is impetus on doing this sooner rather than later.

    The motivation to remortgage is exacerbated for portfolio landlords who own a number of different properties, some of which may be more complex investments such as HMOs, holiday lets or multi-unit blocks. However, the mechanics of arranging many different new loans at the same time can be cumbersome and costly. Fortunately, there is another way.

    For portfolio landlords who want to refinance numerous properties, there are specialist buy-to-let lenders that are able to offer portfolio remortgages, with a single loan secured against multiple assets. This type of remortgage will use an average LTV across the portfolio, which is beneficial for investors who have some assets that are more highly leveraged than others. Investors can also release equity to finance further expansion of their portfolio and some lenders, like Castle Trust Bank, can even include more complex property investments as part of the loan, structuring a solution built for the specific requirements of an individual client.

    When considering a portfolio remortgage, it’s also worth thinking about the overall cost of borrowing rather than just the headline rate, as fees can vary and some lenders that specialise in this area may also offer incentives. For example, at Castle Trust Bank, we offer a valuation incentive scheme at the moment that pays out a cashback of up to £5,000 + VAT and this can significantly reduce the overall cost of borrowing.

    By way of example, we recently had an application for a £14.6m portfolio. We split the transaction into two separate cases, each of about £7m and this enabled us to double the valuation cashback. The total valuation costs were between £25k and £30k and the client was able to claim back £10k + VAT, significantly lowering their costs.

    For investors and for brokers, a portfolio remortgage can provide an efficient and effective way to refinance several properties at once, saving time and multiple fees. So, if you have plans to make the most of the buy-to-let remortgage opportunity and you have clients who are portfolio landlords, think about how a portfolio loan could provide a streamlined way for them to achieve their objectives.

    Read more
  • 08/03/2022 | Group News

    Where women work makes all the difference

    International Women's Day (IWD) provides a key moment to celebrate women's achievements in the workplace and showcase some of our amazing women.

    International Women's Day (IWD) provides a key moment to celebrate women's achievements in the workplace and showcase some of our amazing women.

    While International Women's Day activity is celebrated today, it’s important for all of us to maintain a deep and continuous focus on equity, diversity, and inclusion all year round. Plus, celebrating the work and achievements of women inspires further women to achieve their full potential.

                                                              WIF


    At Castle Trust Bank, we have been committed to our female inclusivity goals via our membership of the Women in Finance Charter, since 2018. 

    By signing the Charter, we commit to doing the following:

    • Have one member of the senior executive team who is responsible and accountable for gender diversity and inclusion. This is our Chief Finance Officer, Paul Lloyd-Jones. 

    • Set internal targets for gender diversity in senior management. Our goal is to achieve a 50/50 split of men and women in our senior roles across CTB.   

    • Publish our progress annually against these targets in reports on our website

    • Ensure any variable pay for the senior executive team is linked to delivery against our gender diversity targets (in place for each of our ExCo). 

    Our amazing women in finance here at Castle Trust Bank 

    All our women (and men of course!) at Castle Trust Bank are amazing. Here’s just a few of our amazing women’s stories...

    Meet Ashani, Head of Corporate Development and Investor Relations: 

     

    “I knew from a young age that I wanted to be in a senior role and that finance was the area I wanted to work in.  My mother was a Finance Director on the Board; I would read her standard books and enjoyed learning more about accounts.  I was drawn to the commercial side, working on strategy and analytical data.  As I was keen to broaden my work experience, I took the step to move from Sri Lanka to the UK to join a manufacturing company as a Finance project manager. I quickly progressed there and after 2 years with them I moved into my first financial services role and worked in a Credit Card Company. This role provided me the background for working on planning, acquisitions and management reporting. After 6 years in this role, I moved into Banking and became Head of Business Intelligence working on MI / Strategy / Regulatory documents and working with the shareholders.     

    Whilst on holiday in 2018 in Sri Lanka, I received a call about an opportunity at Castle Trust and was excited to hear about their desire to get its’ banking licence – I wanted to work there! I was invited back for a final interview; by 9am the following day I was offered the role. Since then, I have found my time at Castle Trust incredibly fulfilling. I love knowing I am helping to shape the future of Castle Trust in the work that I do. 

    I am now 12 years married with a 1-year-old son and have learnt to manage my work life balance successfully.  Castle Trust supported me with my return to work following maternity leave and being a mum has not changed my opportunities. In fact, I knew I was coming back in my current role as Head of Corporate development & Investor relations – a role that I always wanted to do.  I have also learnt to switch off at weekends and focus on my family as well as getting my work completed.  I am a true believer in if you want something at work in terms of career or just want to know something, ask!  Never be afraid to pushback and set expectations. Always have confidence in your approach. As a woman in finance and a working mum I take on any challenge as an opportunity with my motto, to have “self-belief and make your own opportunities” 

    Meet Lauren, Senior Business Development Manager, Omni 

     

    “When I saw the Account Manager role advertised within the Omni team, I knew that Castle Trust was the next stepping-stone for me, to provide me with the right kind of career progression as well as develop my skills and capabilities, and I’m pleased to say that I wasn’t wrong.

    Even within my Account Management role, I had the opportunity to prospect new retailers and I started leaning more towards a Business Development role. 6 months later I was offered the opportunity to formally progress in business development. The move to a Business Development Manager was a great career choice for me and throughout my tenure at Castle Trust, I have learnt from my peers around me which has contributed to my progression within the Omni team. Castle Trust have recognised me for my growth, knowledge, and hard work through my recent promotion of Senior Business Development Manager.

    Castle Trust is already setting me up for my next career move as they have supported me with my City & Guilds Diploma in Leadership & Behavioural Change.  I am a true believer that if you work hard, you will be rewarded.  As I work in a very male orientated environment, I am very supportive of seeing more women in finance across the industry, particularly in the Senior management roles”

    Meet Jo, Savings Operations Manager, Savings 

     

    “Prior to joining Castle Trust, I was on extended maternity leave after I was made redundant from my role as a manager. Even though I already had 13 years of financial services experience, I had lost the confidence to take on another managerial role, so joined Castle Trust as an Administrator. I was also nervous about working whilst having children and what sacrifices I would need to make.  I needn’t have worried as within months of joining Castle Trust, I was promoted to manage the Savings Team, which I love. In this role, my manager involves me in decision making and business plans. I was also provided with the opportunity to study for my City & Guilds Diploma in Leadership & Behavioural Change.

    I do believe there remains a stigma for working mothers in our society and sometimes it does make me feel like I must work extra hard to prove myself and that means I can put pressure on myself and set high expectations. Having said that, I know Castle Trust has the confidence in me and supports me to progress. Whilst I do believe women in senior positions is increasing, there is still more to be done to support this with more flexibility.”

    International Women’s Day 2022 #BreakTheBias 

    Read more
  • 17/02/2022 | Intermediaries News

    Prepare for a flight to quality in specialist Buy to Let

    Rob Oliver shares his thoughts on the opportunity in specialist Buy to Let investments such as HMO's MUFBs and holiday lets.

    It’s a buoyant time to be a landlord. The latest Zoopla UK Rental Market Report says that in Q3 2021 strong rental demand pushed rental growth to its highest level in 13 years, as the resumption of a more ‘normal’ way of life with offices, restaurants and bars, cinemas and theatres and other amenities re-opening – as well as students looking for accommodation –led to strong rebound in rental demand. And, in meeting this demand, investors have rarely had as much choice when it comes to mortgages. Moneyfacts says that at the start of 2022, the number of Buy to Let mortgage products on the market hit the highest level since September 2007.

    One area of particular growth has been specialist Buy to Let on investments such as HMOs, multi-unit freehold blocks (MUFBs) and holiday lets, as existing lenders have expanded their proposition into these areas and new entrants have targeted this more niche sector of the market. There are certainly opportunities within specialist Buy to Let and those investors that get it right often find that they can make returns that are far superior to a more standard Buy to Let investment.

    However, despite the growing demand, as more investors are tempted into this sector by the growing availability of mortgage finance, competition amongst landlords is going to increase. Riding the wave of the market is one thing, but if the landscape changes, it’s important that investors are able to maintain a proposition that still stands out against the competition in a more crowded environment.

    Consequently, at Castle Trust Bank we have seen a flight to quality when it comes to specialist Buy to Let. Since the beginning of the year there has been a significant uplift in the number of applications for larger loans, often over £1m, on HMOs, MUFBs and holiday lets. Sometimes these larger loan sizes are to fund the purchase of larger properties, but often it’s the case that they are desirable, or high-spec properties in more salubrious areas.

    This is a sensible approach. If the market were to turn, it is the most in-demand properties that will continue to attract attention, particularly if they have stand-out qualities when set against the stock of that type. At the same time, even in the current buoyant environment, the best properties will always command a premium and that potentially means better returns for investors. It’s good news for brokers as well, as high-end properties can mean larger loan sizes.

    The current positive outlook for property investors may encourage many to expand their portfolios, particularly when it comes to more specialist type of investment that could deliver better returns. It’s worth thinking about what steps they can take to make their investment more resilient in the future and a flight to quality – choosing to invest in top-end property may help to do just that. If this is a path that your clients choose to go down, make sure you work with a lender that has the experience and expertise in this part of the market to help ensure that they set out on that investment from the best possible footing.

    Rob Oliver, Sales Director 
    Read more
  • 10/02/2022 | Group News

    National Apprenticeship Week is 7th – 13th February 2022

    Meet Amelia and Hubert, two of our most recent Apprentices within our Technology team in Basingstoke.

    It’s National Apprenticeship Week across the UK, celebrating all things apprenticeships and building and developing talent for the future. Castle Trust Bank hired two Apprentices last year, in addition to supporting a number of existing colleagues through the attendance of training courses. This helps develop the skills and knowledge required for a rewarding career, enabling businesses to develop a talented workforce that is equipped with future-ready skills.

    Amelia and Hubert joined us at the end of last year in our Technology team in Basingstoke, and have been fully embedded into Castle Trust Bank.  You can read more on their individual stories below. We also have some other existing colleagues in Finance and Technology completing various qualifications including AAT and Leadership. 

    We are currently looking to provide more opportunities for our existing colleagues across the bank in addition to hiring further external talent via the apprenticeship scheme. 

    “My time at Castle Trust Bank is different from college and for me it is a better experience than going to university as you get the work experience as well as studying.

    I chose to be a Business Analyst Apprentice because I am interested in the business aspect and after completing my GCSEs and attending college, I wanted to go down the BA route.

    I wanted to join CTB as they had good external reviews and it looked a great place to work. I previously worked in a care home whilst at college so have never been in an office environment before. It looked like a challenge, and it has been amazing since joining.

    The support from my manager has given me right amount of work but not overloaded me showing how the system Polaris works but also leaving me to learn and complete my own tasks. Another colleague  is helping me out and giving guidance when needed as well as another member of the team  on the Property side of my role.  I feel so welcomed and I am learning so many new things. I have settled in really quickly.

    After my course is completed, I want to progress through Technology and carry on being a BA and hopefully become a senior in my role and continue to being challenged.”
    Amelia – Business Analyst
    Joined September 2021

    “I chose IT Support as I have always been passionate about IT since I was young and then going to college, they didn’t offer an IT course, so I studied Business Marketing. My IT Apprenticeship course is aimed at IT in general with desktop support as one of the subjects as well as Networking and Azure Cloud.

    The first interview I had Castle Trust Bank felt welcoming and easy to talk to the team. The team have been great, and the support given has helped me in my role. I have picked things up on the job and although the team is busy it helped me to be thrown in at the deep end. My colleagues  have been a great help day-to-day. My Team Leader has sat down with me around my development and looking at what I need to work on as well as how I want my role to develop.

    The external apprenticeship coach helps keep me on track and guides me through any challenges as well as looking at health and safety, DSEs and mental health supporting me with working in an office as it’s not something I have done before.

    My end goal is to continue with my role and progress and grow with the company. I have already set-up a training session with the Security Team as this is a field of IT I am really keen on and they are willing to guide me with this next step.

    I would definitely say to a new Apprentice look out for opportunities at CTB as the knowledge the company has is great as well as being a great place to work.  My friends have said they are jealous that I am working at CTB and all want to join!”
    Hubert – Desktop Support Analyst
    Joined September 2021

    Read more
  • 01/02/2022 | Intermediaries News

    Castle Trust Bank strengthens Property team

    Castle Trust Bank has strengthened its Property team with the appointment of Anna Lewis in the newly created role of Director of Proposition & Strategy.

    Castle Trust Bank has recruited Anna Lewis as Director of Proposition & Strategy to help drive the bank’s ongoing development of its specialist Buy to Let and Development Finance propositions.

    Anna, who joins from Hampshire Trust Bank where she was Head of New Business, has nearly 18 years’ experience in intermediary mortgages, having previously held roles at Purely Mortgages and Interbay Commercial.

    She joins Castle Trust Bank in the newly created role of Director of Proposition & Strategy, with a focus on continuing to develop its specialist Buy to Let and Development Finance propositions to deliver even more lending solutions that meet the needs of property investors.

    Anna said: "This is a fantastic time to join a company that has ambitious plans to grow. With my expertise in specialist mortgages we can continue to build on the great proposition that Castle Trust Bank already has in place, working closely with intermediaries to support them and understand how we can continue to evolve and meet their lending needs.”

    Barry Searle, Managing Director, Property, said: “I’m very pleased to welcome Anna to the team. She has a wealth of experience and a great track record in working with intermediaries to identify the evolving needs of property investors and developing propositions to meet those needs. We have already had a huge amount of success with our specialist Buy to Let and Development Finance offering and Anna will become a key member of the team in building on that success and putting Castle Trust Bank at the forefront of consideration for any broker who has property investor clients.”

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  • 07/01/2022 | Intermediaries News

    Will landlords hold fire on EPC changes?

    The upcoming changes to EPC regulations for landlords are almost certain to be a big buy-to-let talking point this year, but questions remain as to whether landlords will be racing to upgrade their properties or hold fire until nearer the deadline.

    Currently, domestic private rental properties must meet a minimum level of energy efficiency of an EPC rating of E. However, from 2025, all new tenancies will be require the property to have a certification rating of C or above, and this will apply to all existing tenancies from 2028.

    It’s a long way in the future, but is a talking point now as landlords who are refinancing onto a five-year fixed rate may want to consider raising capital at this stage to cover the potentially extensive costs of converting an E rated property to a C – not least to take advantage of the current low interest rates. The work involved in delivering such an uplift in energy efficiency could include insulating walls and the roof, upgrading the heating system and installing double or triple glazed windows, and so may require an investor to increase their borrowing to finance these improvements.

    However, a question remains as to whether landlords will behave in this way and begin work sooner rather than later, or delay the expense of making improvements until absolutely necessary.

    A consideration will clearly be whether making improvements to the energy efficiency of a property will deliver an uplift in rental income and capital value. Common sense indicates that a more energy efficient property will be more attractive to tenants because of the lower associated heating costs and so could potentially attract higher rent, but in reality will the impact on income justify the expenditure?

    One resource that could be useful for landlords is a tool on the Halifax website that offers a high-level calculation of the cost of undertaking work to make a property more energy efficient and the resulting energy cost savings. This could provide some indication of any increased rental income that may be able to be achieved by providing tenants with a property that has lower energy bills. However, it’s unlikely that landlords will be able to increase rents by the full energy savings and the cost of the work is always likely to be larger in the short term than any savings achieved.

    One issue when it comes to the price achieved by more efficient properties is that surveyors value property based on an assessment of current market value, which is driven by buyer demand. The energy efficiency of the property is not a consideration in the valuation unless it leads to a quantifiable shift in that demand. Currently, we are seeing no major shift in how much buyers or renters are prepared to pay for a more energy efficient property. This may happen in the future, of course, but until it does the energy efficiency of a property is unlikely to materially influence its value – or its potential rental income. It may be some time yet before the best environmental intentions from consumers translate to a willingness to pay more from their own pocket.

    There also remain unanswered questions about how regulation will impact the owner occupier market. A property with an EPC rating of E may not be able to be let out on a new tenancy as of 2025, but as it stands, it will still be able to be sold to a buyer who chooses to live in the property. The value is likely to be detrimentally impacted if the property requires work in order to be let out, making it less appealing to investors, so it will be interesting to see how this dynamic plays out.

    One other consideration for investors, and one that may encourage some to carry out the work sooner rather than later, will be the lead time required to make any changes and the availability of materials and tradespeople. There will undoubtedly be a rush to make changes ahead of the deadline and, as many investors who have attempted a refurb project recently have found out, sourcing tradespeople and materials can be a lengthy and expensive process. Costs, invariably, increase in line with demand. Jumping the queue and completing any required work before demand increases may ultimately enable landlords to carry out the work more efficiently.

    Whatever trends we see in landlord behaviour over the coming year, it’s important to understand the individual considerations and concerns of your investor clients, so strike up the conversation and make sure they are aware of their options – even if they do choose to hold off on starting any renovations.

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  • 07/01/2022 | Intermediaries News

    Castle Trust Bank updates products and extends offer

    We have cut the rate of our 5 year fixed rate product and have extended our valuation rebate offer.

    Castle Trust Bank has cut the rate on one of its most popular products, extended special offers and improved valuation criteria as part of a range of new year proposition enhancements.

    We have cut the 5-year fixed rate with a 5-year ERC, up to 75% LTV, on our popular TermTen range by 0.59% to 4.15%. In the same range, we are maintaining our special rate of 3.95% up to 70% LTV and 4.50% up to 75% LTV on 5-year fixed rates with a 2-year ERC.

    In addition, we are extending our cashback offer of up to £5,000 + VAT on valuations fees across its entire product range, from the end of February until the end of April 2022.

    We have also made improvements to our valuation criteria, including all property portfolios will now be assessed on open market value, freehold blocks up to 20 units will be assessed on aggregate market value and freehold blocks greater than 20 units will be assessed on investment block value.

    Rob Oliver, Sales Director, said: “At Castle Trust Bank, we understand that a good specialist Buy to Let proposition is a combination of factors, including rate, service, criteria and incentives, and we are always looking into how we can improve our proposition for brokers and their clients. Our new year enhancements include a significant rate reduction on one of our most popular products, the extension of great rates we had previously introduced as special offers, and we are continuing our valuation cashback offer until the end of April. This has already been in high-demand and we know that the current environment and prevalence of the Omicron variant means many businesses in the property industry are currently working under capacity, which is prolonging the process for many transactions. So, it seems only right that we extend this offer to give as many customers the opportunity to benefit from it as possible.”

    Read more
  • 07/12/2021 | Intermediaries News

    The Pros and Cons of using Ltd Companies for BTL

    Many investors choose to hold Buy to Let purchases under a company structure. We consider some of the pros and cons here.

    A record number of new limited companies were set up in 2020 to hold Buy to Let properties, according to analysis of Companies House data by estate agent, Hamptons. It says that last year there were a total of 41,700 Buy to Let incorporations, an increase of 23% on 2019.  The numbers have more than doubled since 2016, when tax changes for landlords were introduced and at the end of 2020 there were a total of active 228,743 Buy to Let companies.

    However, a limited company structure is not for everyone, and many investors still choose to hold Buy to Let purchases in their own name. So, what are the considerations?

    Here are some of the pros, cons and considerations of holding a Buy to Let investment in a limited company. Naturally most of the differences come down to tax treatment, but there are other things to think about and it’s important to seek the guidance of a specialist adviser before making a decision about what’s right for a client’s circumstances.

    Pros of a limited company

    Restrictions on mortgage interest relief don’t apply to a limited company

    In 2015, the then chancellor George Osborne announced that mortgage interest tax relief would be gradually eradicated for individuals between 2017 and 2020. As it now stands, individual Buy to Let landlords are unable to offset any of their mortgage interest costs against their tax bill. The government has introduced a 20% tax credit for people in this position, but it is not as beneficial for higher rate tax payers. The mortgage interest payable on a Buy to Let mortgage for a limited company can still be offset against its tax bill.

    Corporation tax rates are lower than income tax rates for most landlords

    Profits generated by an investment property that is owned by an individual will be taxed at that individual’s personal tax bracket, which could potentially be 45%. Profits generated by an investment property that is owned by a limited company will be subject to corporation tax, which is currently 19%.

    In this year’s Budget it was announced that the top rate of corporation tax will increase from April 2023 to 25%. However, it’s worth noting that the top rate will only apply on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be relief for businesses with profits under £250,000 so that they pay less than the main rate.

    A limited company provides more varied options for tax planning

    With a limited company investors can choose to draw income as and when they need it in the most tax efficient way. For example, a married couple owning an investment property through a limited company could separately reward themselves dividend payments, to maximise their tax free thresholds. There may also be more complex tax planning opportunities to meet an individual’s individual circumstances and it’s always important to speak to a specialist tax adviser.

    Limited companies are separate legal entities, so they offer limited liability protection to landlords

    There is a degree of comfort and separation in owning a property in a separate legal entity. For example, if tenants have unpaid utility or council tax bills, it is the limited company that will be contacted as the owner of the property, rather than the individual.

    Drawbacks of a limited company

    Landlords are still subject to personal tax when they take income out of the company

    Corporation tax may be less than income tax, but if you want to use the money you earn from a Buy to Let investment you will need to draw money from the limited company and this may also become subject to personal tax. So an investor may be paying corporation tax through the limited company in addition to personal tax on income or dividends. Specialist tax advice should always be sought in these situations.

    No Capital Gains Tax (CGT) allowance

    Individuals are able to benefit from CGT allowance on profits when they sell a property. Limited companies cannot. The 2021-2022 CGT allowance is £12,300.

    There are additional administration considerations and costs

    A limited company is a separate legal entity, and while a company can be set up at Companies House for just £12, the company will come with a number of responsibilities, including reporting and accounting. Outsourcing these tasks will come at a cost.

    Transferring an existing property from own name to a limited company is subject to costs

    There are costs involved in transferring existing properties owned by an individual into a limited company. As the ownership or the property is changing it could be subject to Stamp Duty Land Tax, legal costs and potentially Capital Gains Tax. So it’s worth weighing up these costs and speaking to a specialist tax adviser before making the change.

    There remain fewer products for limited companies

    However, this situation is changing and many lenders, like Castle Trust Bank, offer the same rates for both individuals and limited companies.

    Within its research, Hamptons provided a useful example of tax payable during the 2020/2021 tax year on a property worth £250k, with a 75% LTV mortgage for a limited company, lower rate tax payer and higher rate tax-payer.

     

     

    Limited Company

    Personal (lower rate)

    Personal (higher rate)

    Purchase price

    £250k

    £250k

    £250k

    Rent

    £12k

    £12k

    £12k

    Mortgage interest

    £6563

    £4688

    £4688

    Gross profit

    £5438

    £7313

    £7313

    Tax due

    £1033

    £1463

    £3863

    Net profit

    £4404

    £5850

    £3450

     

    This calculation assumes a 75% LTV interest only mortgage with a rate of 2.5% on a property held in a personal name and 3.5% for a property held in a limited company. Gross profit is calculated after costs but before tax. Net profit is calculated after all costs, including tax.

    Whichever route your clients choose depends on their individual circumstances and it’s important that they seek the guidance of a specialist property tax adviser before making a decision. You can of course discuss their options, particularly when it comes to mortgage product choice, but don’t be tempted to stray into offering tax advice if you don’t have the permissions to do so. Many broker firms find that it’s beneficial to have a referral agreement with a tax adviser, both as a way of offering additional services to their clients and of generating new business leads.

    Rob Oliver, Sales Director at Castle Trust Bank

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  • 01/12/2021 | Intermediaries News

    Castle Trust Bank launches valuation cashback offer

    We are delighted to offer a rebate of up to £5,000 + VAT on valuation fees, subject to conditions.

    Castle Trust Bank is offering a cashback of up to £5,000 + VAT on valuations fees across its entire product range.

    The offer applies to all valuation fees paid on or after 1st December 2021, where the loan completes before or on 28th February 2022. It is available across the Castle Trust Bank product range and the cashback of up to £5k + VAT will be applicable on most loans.

    Rob Oliver, Sales Director at Castle Trust Bank, said: “We’re really pleased to be able to offer this valuation cashback which gives brokers and their clients reason to celebrate as we close 2021 and enter 2022. A good example of the amount that could be saved is a recent £3m completion, where the valuation fee was £3,250 + VAT. The cashback of up to £5k + VAT will mean that most customers who pay their fees from today and complete by the end of February, will not have to pay a valuation fee. Feedback from brokers tells us that valuation cashbacks offer a bigger benefit than free valuations as they enable greater freedom to choose a surveyor, which is particularly important in the current environment where there have been reports of delays with some firms.

    “It’s further demonstration of our understanding of what brokers want and commitment to supporting our intermediaries, building on our rate reductions earlier this year and our recent criteria enhancements, which included lending to first-time buyers.”

    To find out more about how Castle Trust Bank could help you, or to find your local BDM, please click here.

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  • 01/12/2021 | Intermediaries News

    How bridge-to-term loans can provide certainty

    Our latest blog goes into more detail about how Bridge to Let can provide the certainty your clients need.

    A bridging loan is a trusted form of finance relied on by property developers and investors as it offers short-term finance to get building projects off the ground and sale ready.

    However, delays in construction caused by the pandemic, and investors re-evaluating what they do with their assets has meant that deciding when to switch to longer-term finance solutions is often less clear. This is further complicated by the current speculation that the Bank of England will need to start raising interest rates shortly.

    If market conditions have got tougher since the start of your development, it’s not always easy to sell multiple homes at the right price quickly when the term of your bridging loan expires. Equally, if the market is rising, you may want to hold onto some of the units for a little longer.

    That’s why we offer our clients a bridge-to-term option.

    What is a bridge-to-term loan?

    A bridge-to-term loan is a solution which initially serves as a bridge. The developer takes out a short-term bridging loan (which is usually available for up to nine months) to purchase the property and/or complete their construction project, in the knowledge that a switch to a term mortgage at the end of the bridging period has already been guaranteed. Once the project is completed, the bridging loan will switch to the pre-agreed buy-to-let term mortgage, with interest-only payments each month for a term of up to 10 years.

    Castle Trust Bank will consider foreign nationals, ex-pats and first-time landlords. We will also use holiday let income instead of assured short hold tenancy income to assess affordability on holiday let properties.

    How to use this kind of finance

    Bridge-to-term loans are designed to give investors a guaranteed exit strategy from the bridge on a residential project.

    Typical exit strategies can include the sale of the development, or a remortgage through a new application so the properties can be rented out. Either option, however, is subject to levels of uncertainty so a bridge-to-term loan can provide a guaranteed exit strategy right at the beginning of the process – and with Castle Trust Bank, this can be achieved through a single application form.

    A bridge-to-term loan can give investors the flexibility to gain income from the site while it is being rented out or sell the development for its full market value once this has been realised post-completion.

    With this kind of finance, developers can take their time with an asset to evaluate options and wait for the most favourable market conditions. It gives them the opportunity to assess how many units they want to sell, rent out or hold in the short term while they gauge the market and calculate potential gains.

    Repayments and rates

    Our bridging rates are set to 0.67% per month, with a maximum loan to value (LTV) of 80% of the gross day one value. Term rates start at 3.82%, with a maximum LTV of 75% of the net value – with up to £15m available on term loans.

    One thing that property investors may be nervous about is the risk that term rates will have increased by the time their bridging loan finishes, and are looking for longer-term finance. Currently, there is speculation that the Bank of England will need to increase rates above its long-term, historic low of 0.10%.

    Speaking to the Commons Treasury shortly after the November base rate decision, Bank of England governor Andrew Bailey said he was “very uneasy about the inflation situation” as it rose to 4.2%, more than double the central bank’s 2% target. This has put fresh pressure on the bank to increase the base rate at its next meeting on 16 December.

    Bridge-to-term loans can help with this uncertainty; the rate for the term portion of the loan is agreed as part of the original application and is carried forward to when the term product is activated, providing borrowers with certainty around the cost of their future loan. To add even greater certainty, the initial interest rate on the term loan can be fixed for either two or five years.

    Rise in use of bridging loans

    Changes to permitted development rules earlier this year enabled a wider scope of commercial properties to be converted for residential use and shifts in property buying behaviour over the course of the pandemic have driven up the use of bridging.

    Over the last 18 months, property investors have converted retail space into residential accommodation or mixed-use sites as well as renovated properties to rent out in the holiday let market.

    According to the Association of Short-Term Lenders, bridging completions rose by nearly a quarter in Q2 and 136% on the previous year.

    With bridging loans in such high demand, we want to give our clients peace of mind that the exit route is guaranteed.

    Case study

    One example of the use of a bridge to term is a recent case completed by Castle Trust Bank where we issued a £4.5m bridging loan 14 working days after the initial terms had been issued.

    We worked with broker firm Sirius Property Finance to refinance an existing development, including mezzanine finance, on a permitted development scheme of 25 flats in Reading.

    The case had a complex nature as it was secured on a first charge over a head lease in a company name.

    Terms for the case were issued on 29 September, with the application completed and documents submitted within 24 hours. The case was underwritten, offered and solicitors instructed within three days.

    The case eventually completed on 19 October.

    Rob Oliver, sales director at Castle Trust Bank, said the case was a “great example of what can be achieved when all parties work collaboratively to get a case across the line”.

    Nicholas Christofi, managing director of Sirius Property Finance, said he was pleased with how Castle Trust Bank were able to turn the case around and meet the client’s requirements.

    “It was a tricky case with a tight deadline, and we pulled together to make it work,” Christofi added.

    Overall, bridge-to-term loans offer the certainty of an exit strategy to investors without the usual hassle that comes with refinancing. Thus, investors have the capacity to adjust their business plans depending on changing market conditions and make confident, informed decisions on what to do with their assets.

    Read more
  • 29/11/2021 | Intermediaries News

    2021 - a year of changes in Buy to Let

    Barry Searle, Managing Director of Mortgages at Castle Trust Bank, takes a look back at 2021.
    In 1996 the Association of Residential Letting Agents (ARLA) worked with a small group of lenders to develop and launch a mortgage product specifically tailored for landlords and so, 25 years ago the first Buy to Let mortgage was born.

    I’ve been involved with the specialist property lending market for more years than I care to remember, and I can safely say that over the last quarter of a century, few years have seen quite as much change in the Buy to Let market as 2021. 

    As the UK slowly emerged from lockdown in the first half of the year, it was clear that the impact of lockdown had changed many people’s attitudes to where they want to live. Data from property website, Rightmove, shows that increased demand from renters to live further away from cities has led to asking rents in suburban and rural areas jumping by 11% since before the pandemic started. This is compared to asking rents increasing by just 2% in urban areas.

    Rightmove says that demand for each available property is up 155% compared with pre-pandemic levels in suburban areas, and up 224% in rural locations. Demand from renters looking in urban locations is also rising, but by not as much at 82%. However, there are more homes for them to choose from. Of all the available rental properties on Rightmove, 64% of them are now in urban locations, which is up from 48% pre-pandemic. The proportion of available properties that are in the suburbs has dropped from 46% to 33%, while rural areas have declined from 6% to 3%.

    While most of the increase in rental demand has been in rural and suburban areas, the UK Rental Market Report by Zoopla for Q3 2021 found that London rental growth swung back into positive territory after 16 months of falls. And Zoopla says that rental demand will remain higher than supply as the availability of properties to let is 43% below the five-year average.

    This increasing imbalance between supply and demand of rental property has encouraged investors in greater numbers to refurbish properties and introduce new higher standard properties into the rental stock. Property refurbishment has always been a popular method for investors to achieve greater returns – increasing the capital and rental value of a property by carrying out renovations and 2021 has seen the emergence of product innovations that have encouraged more investors to take the plunge. 

    Traditionally a refurbishment project is funding by a bridging loan and then an investor has an option to sell the property or refinance onto a term product. However, in an uncertain environment, both of these exit routes present uncertainty and potential extra costs to investors. So, this year, lenders have addressed this uncertainty by providing short term loans for property refurbishment combined with an assured exit. One example is our Bridge to Let product at Castle Trust Bank, which has proven to be very popular throughout the year.

    2021 was, of course, the year of the staycation. This trend presented opportunity for property investors and the popularity of holiday lets surged. In fact, in September, Primis Mortgage Network says that holiday let mortgages were the most common broker query during the month. Travel is likely to open up in the future, but the popularity of holiday lets looks set to stay. In fact – perhaps reflecting awareness raised in the recent COP26 summit – Sykes Holiday Cottages says that one in five people are more likely to consider a staycation because of concerns for the environment.

    Holiday lets are one way for investors to achieve better yields, but the two highest yielding types of property investment this year, according to research by BVA BDRC, are HMOs and multi-unit blocks and both of these have also performed strongly over the past 12 months with demand from both tenants and new investors entering the market. As with property refurbishment, many of these investors have benefited from product innovations, such as Bridge to Let, that have enabled them to maximise opportunities with the safety net of a guaranteed exit from their initial short-term finance.

    This growing demand for more complex types of Buy to Let investment reflects the maturing market. Buy to Let reached its 25th birthday in 2021 and many investors are now more confident in taking on more work in return for greater returns. Lenders have responded to this trend and the range of options for specialist Buy to Let has never been as large. We can look back on 2021 as a year when a lot was achieved despite the challenging circumstances. And we can look forward to 2022 with optimism.
    Read more
  • 26/11/2021 | Intermediaries News

    Helping foreign nationals and ex-pats access high yielding investments

    High-end property investments are showing signs of recovery - here's how we may be able to help your foreign national and ex-pat clients gain access to such properties.

    The UK property market remains an attractive place for investors as house prices continue to climb. According to Halifax, property prices registered the strongest monthly rise for 14 years in September, pushing the average cost of a home to a record high and reversing a three-month decline in annual growth.

    At the same time, estate agent Savills has said that London’s high-end property market is showing glimmers of recovery following a second consecutive quarter of price increases on the back of years of falling or flat-lining values, according to new data. Savills says that prices of expensive London homes rose by 1.4% in the year to September, including a rise of 0.7% in the latest three-month period.

    Activity in the top-end London market is also a sign that foreign investors are returning to the UK capital. With travel restrictions easing and property prices remaining robust, this trend is likely to continue, which means you are more likely to encounter foreign nationals or expats who want to invest in UK property. And just as domestic investors are increasingly seeking investments that can deliver greater returns this is something you should expect to see more of from your expat and foreign national clients.

    The good news is that there are opportunities for expats and foreign nationals to invest in things like HMOs and holiday lets. At Castle Trust Bank, we recently worked with a foreign national who had been living in London for more than five years. They had clean credit and owned their main residence and they were looking to purchase a four bed HMO in an area that was already established for HMOs and with four occupants already in situ. The client was looking to raise 75% LTV, and this proved a challenge with some lenders, given that it was their first investment property and they were, of course, foreign nationals. However, given the strong set of circumstances, we were able to help them achieve their objectives.

    Another recent case was an expat couple living in Switzerland. They owned two Buy to Let properties in the UK and were looking to make their first UK holiday let investment – a property based in the North of England near the Lake District. The yields were promising and so the couple were looking for a lender that could take into account their existing letting experience in the UK so they could purchase the property. Again, we were able to weigh up the case and given their Buy to Let track record, we were able to help these expat clients to buy their first holiday let investment.

    The strong UK property market is going to attract an increasing number of expat and foreign nation investors and often they will want to invest in more complex, high-yielding options. This combination is likely to put many lenders off, but in the right circumstances, with a strong case behind them you can still find a way to help these clients access the finance they need to help them achieve better returns. You just need to know which lenders to turn to.

    If you'd like to discuss an enquiry, you can find your BDM here.

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  • 15/11/2021 | Intermediaries News

    The growing popularity of multi-unit blocks (MUBs)

    Previously thought of as a more sophisticated property investment, multi-unit blocks are now becoming more commonplace. We explore MUBs further in this blog.

    As Buy to Let landlords become more sophisticated, traditionally specialist types of property investment become more common. In fact, research from a recent BVA BDRC Landlord Panel found that 13% of landlords own a multi-unit block, with an average yield of 6.6% – the second highest yield for all types of property owned.

    Unlike an HMO, which provided the top yield, a multi-unit block contains separate, independent residential units, each with their own AST agreement. Each household has its own entrance and private areas into which no one else has right of access, and there are also likely to be common parts, such as a hallway or garden, that all households have the right to use. Examples of multi-unit blocks include purpose built blocks of flats, houses converted into flats, and very occasionally a number of houses all held under one freehold title.

    Multiple-unit flats are lucrative for investors because they provide economies of scale. They can also be lucrative for brokers as, by their nature, they tend to be larger deals. Often a multi-unit block provides opportunity for investors to realise greater capital gains, as it’s possible to increase the value of each unit by separating the title and selling them off individually.

    This was the case with a client we recently worked with at Castle Trust Bank. The client was a newly incorporated UK-based limited company formed of two directors, both with existing UK lending experience. They wanted to purchase a multi-unit block of flats, all held on one freehold, based in the West Midlands – and the broker needed a quick completion to secure the transaction.

    The multi-unit block contained 14 units, had a total value of £1.7m, and individual leasehold agreements for the properties had yet to be arranged. So, this presented an opportunity to increase the overall value by separating the leases and selling some or all of the flats individually. The clients were looking to raise 75% LTV to purchase the whole block on one loan, which we were able to provide with a cross collateral charge – and completed in 24 days.

    The clients then had the opportunity to increase the value of the 14 units by carrying out the necessary legal work to create individual titles for each of the properties so that they could be sold independently.

    We are seeing more enquiries along these lines, where investors are seeing the potential in taking on multi-freehold blocks and, at Castle Trust Bank, we’re often able to structure bespoke solutions that enables investors to achieve their objectives, giving them the flexibility to make decisions as to the best course of action during the process. As more landlords look to invest in multi-unit blocks, make sure you are partnering with the right lenders to help them make the most of this lucrative opportunity.

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  • 08/11/2021 | Intermediaries News

    Using Bridge to Let to manage sales in a rising market

    Bridge to let can provide property developers and landlords with options on whether to retain or sell units in a rising market.
    House prices have risen by nearly 10 per cent in the last year, according to the Halifax House Price Index and values are expected to keep on growing. The latest report said that “the current strength in house prices points to a deeper and long-lasting change”.
    As always, beyond the national picture there are also more local regional trends.

    Property prices in Greater London, for example grew by just 3.1 per cent in the last year, according to the index, as demand for city living dropped in favour of larger homes with more outside space in more rural areas. 

    The top-line rate of house price inflation is good news for developers of course, but it also poses a problem. Once they have completed a scheme, are they better off selling all the units while the market is hot or holding on to some to benefit from additional capital gains?  

    In addition, for those investors building units in London, there’s a question as to whether they would be better off holding on until the impact of lifting lockdown restrictions is better known, when smaller properties close to amenities are likely to be more in demand. 

    Timing is everything when it comes to investing and so the ability to have more control over when to make a sale can be a very powerful tool for developers. So, how can developers achieve greater control over when they sell some of their units? 

    Gaining control 
    One way of doing this is to use bridge-to-let. The bridging element of bridge-to-let can be used as a development exit loan to refinance the scheme that is completed or nearing completion, often at a lower rate than the development finance facility.

    Then, when the properties are ready, the developer can choose to switch all the properties onto a buy-to-let loan and let the properties to tenants, perhaps with the intention of selling at a later date. Or, if they choose, they could sell some properties now and switch some onto the buy-to-let loan, reducing the outstanding balance in the process. 

    Some lenders can also structure clever hybrid loans that give developers even greater flexibility. For example, a development exit loan which has a hybrid solution that combines a serviced loan and a bridge.  

    The loan can be split at the outset between a bridging loan on some properties that are being marketed for sale and a fixed rate loan with serviced interest on those that were being retained to let out.  

    Once the term ends, the bridging loan can be converted to a serviced loan without an early repayment charge (ERC), enabling the client the flexibility to choose whether to deleverage at this stage or to service the debt. 

    The current market is encouraging increased activity from developers and the use of bridge to let, or a structured hybrid loan, can prove an important tool to give them the control they need to maximise their returns. 
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  • 04/11/2021 | Intermediaries News

    We discuss the latest ex-pat property purchase trends

    We discuss our recent observations that ex-pats and foreign nationals continue to invest in the UK property market, but are purchasing smaller property portfolios.

    You can see the video, which is 7 minutes long, on Castle Trust Bank's YouTube channel here.
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  • 04/11/2021 | Intermediaries News

    Is the pandemic trend of moving out of cities starting to reverse?

    In the first of our latest set of four discussions around the specialist property lending market, we look at whether the trend of moving out of the cities during the COVID pandemic is starting to reverse, and the impact that could have on property investors.

    You can see the video, which is 8 minutes long, on Castle Trust Bank's YouTube channel here.
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  • 01/11/2021 | Intermediaries News

    Not all Holiday Let propositions are created equal

    We take a closer look at some of the criteria that make a strong Holiday Let lending proposition stand out from the crowd.

    Holiday lets have been a key investment trend for Buy to Let landlords in the last year and for obvious reasons. A successful holiday let has always been able to deliver better returns than a comparable property let on an AST, albeit accompanied by more costs and inconvenience, and the phenomenon of pandemic-driven staycations has pushed those potential returns through the roof.

    There are still many considerations for landlords, of course, and investing in a holiday let is not a guaranteed formula for success, but the opportunity has peaked investors’ interest and lenders have responded with the launch of new holiday let products and propositions.

    However, not all holiday let propositions are created equal and there are some key criteria that can make the difference between a deal that works and one that doesn’t.

    One piece of criteria that can prove critical as to whether or not you can secure funding for your client’s holiday let aspirations is how the lender assesses the affordability of the loan. Many lenders launch holiday let products but still base their affordability assessment on the income achievable on an AST basis, even though a holiday let could earn a far greater amount, meaning that the client could borrow more towards it.

    This criteria is most notable on larger, more expensive properties, which can often prove to be the most in demand holiday let investments. For example, recently at Castle Trust Bank, we worked with clients who were looking to raise funds to purchase a holiday let property on a converted farm valued at £1.3m, borrowing up to 75% LTV. In order to achieve this leverage, the clients needed a lender that would be able to base its assessment on the holiday let income rather than AST rental income. An added complication was that this was to be the clients’ first holiday let investment. We were comfortable with the clients’ proven letting experience given their existing portfolio and we also use the projected average of the high, medium and low monthly holiday rental figures, which mean they were able to achieve the loan they needed.

    Even for those lenders that do use holiday let income rather than AST, establishing a track record of earnings potential can be tricky. Another client we worked with was an experienced landlord operating through a limited company. They were looking for a loan to purchase a holiday let property located in a popular holiday region and wanted to raise 70% LTV to purchase the property and make some improvements to improve marketability and rental yield. However, the COVID-19 restrictions severely restricted the client’s ability to take on bookings, which would have made it difficult to service a loan whilst the lockdown was in place.

    Seeing the potential of a large property in a popular holiday location, we were able to provide a Buy to Let bridging loan, which allowed the client to purchase the property without the need to service the interest, and to accumulate bookings during that period ready for when restrictions were eased.

    So, if you have clients who want to invest in holiday lets, make sure you work with a lender that offers criteria that makes it easy for them to make their aspirations a reality.

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  • 27/10/2021 | Group News

    We support the Mortgage Industry Mental Health Charter

    We already have a number of initiatives at Castle Trust Bank that support the mental health and wellbeing of our staff, and we're delighted to have signed up to the Mortgage Industry Mental Health Charter.

    We're proud to have become a signatory to the Mortgage Industry Mental Health Charter (MIMHC). Not only does the charter demonstrate the importance the mortgage industry places on the health and wellbeing of its staff, it makes a public commitment towards meeting minimum levels of support.

    Perhaps unsurprisingly, mental health awareness has risen dramatically since the beginning of the COVID pandemic, and Castle Trust Bank fully supports any initiatives that raise awareness and provide support. We've already introduced a number of initiatives within the Bank, which have enabled us to meet the key commitments required of signatories to the charter which are:

    1. Develop mental health awareness among employees using
      activities and advocacy.
    2. Encourage open conversations about mental health and the support available to employees who may be struggling.
    3. Provide employees with good working conditions that encourage a healthy work life balance and opportunities for development.
    4. Promote effective people management through line managers and ensure there is a focus on physical and mental wellbeing as well as performance.
    5. Routinely monitor employee mental health and wellbeing through surveys and regular contact with managers.
    6. Have a named contact for Mental Health Support.

    More information can be found out about the charter on the MIMHC website.

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  • 07/10/2021 | Intermediaries News

    Considerations for first-time HMO investors

    HMOs (houses in multiple occupation) can be an attractive way to increase rental yields - we explore the option more in this blog.

    We are seeing a growing number of existing landlords who are choosing to diversify their portfolio, from letting out property on a standard AST, to investing in an HMO for the first time. If this is a trend you are also experiencing, it’s important to know the key considerations that will factor into your clients’ decision-making.

    An HMO (house in multiple occupation) is a property rented out by at least three people who are not from the same household but who share facilities like the bathroom and kitchen.

    In England and Wales a licence is required to rent out an HMO if it is rented to five or more people who form more than one household, although in some cases a licence may be required for a smaller property if the council requires one to be in place. This time last year, there was perhaps some doubt about the future demand for HMOs, but reports are that, if anything, there is actually growing demand for reasonably priced, flexible housing near to city centres and key hubs like hospitals and universities.

    The most obvious reason why so many landlords are choosing to invest in an HMO is that it can usually deliver stronger returns than a single let property. According to BuyAssociation, research from BVA BDRC shows the average rental yield for an HMO property is 7.5%, which is 1.5% above the overall average rental yield for property investments. And the gap appears to be widening as BVA BDRC says that between Q1 2020 and Q1 2021 this difference has increased by 0.6%.

    As well as the potential for stronger returns, earning rental income from multiple tenants means that landlords have less exposure to arrears than they would if they let the property to a single tenant – if one tenant is unable to pay or one room remains unlet, there is still the potential for income from other tenants.

    Additionally, an HMO would ordinarily be operated as a limited company as the more complex nature of the investment and multiple sources of rental income make it more suited to this type of structure, and this may have some tax advantages over a single-let property owned in an individual’s name.

    There are, of course, additional considerations. For example, there is increasing legislation and regulations that landlords need to be aware of and investors need to be confident that they understand the local rules for the area in which they are buying.

    The supply of property suitable to being used as an HMO is also limited and investors often need to convert existing properties, often using short term funding. An HMO is also likely to come with higher start up and operating costs, such as furniture costs, adhering to fire and environmental health regulations, utilities, maintenance and letting agent fees.

    Ultimately, and like any other property investment, the decision whether to invest in an HMO will come down to an investor’s own individual appetite for risk and reward, combined with their desire and ability to take on the extra associated work. However, there are new product innovations that can take some of the uncertainty out of an investment in an HMO. For example, a Bridge to Let mortgage can combine a short term loan that can be used to convert the property so it is fit for purpose, with a guaranteed exit route onto a term mortgage at a lower rate, and a product like this can take some of the stress and complication out of diversifying in a new area that has the potential to deliver greater returns.
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  • 29/09/2021 | Intermediaries News

    Greater Confidence for Refurb Projects

    Rob Oliver, our Sales Director, shares his thoughts on the opportunities refurbishments projects have to offer

    As originally published in Specialist Finance Introducer

    Ongoing property price inflation and growing rental demand mean that refurbishment projects continue to present a good opportunity for investors. However, there are also obstacles in the current environment, with plenty of anecdotal evidence of building projects stretching beyond their original budgets and timelines due to an increase in demand for builders, and shortages of/increases in the price of construction materials.

    The evidence isn’t only anecdotal. The Monthly Statistics of Building Materials and Components published by the Department for Business, Energy & Industrial Strategy has confirmed that between May 2020 and May 2021, there has been a 10.2% increase in all building work, including a 10.8% increase in the construction of new housing. This increased demand has combined with some limitations in supply to drive up the cost of some construction materials. According to the report, the biggest annual change has been to the price of concrete reinforcing bars, which have increased by nearly 43% in the last year, while fabricated structural steel has risen by more than 38% and the cost of imported plywood has gone up by almost 30%.

    These are significant price increases that could easily erode any contingency budget, so it’s important that your clients go into their next refurbishment project with their eyes open and a plan to overcome any extra costs that are out of their control.

    One way of increasing the available budget for a refurbishment project, of course, is by borrowing more at the outset, so that there is extra margin to meet any unexpected outgoings. How much your clients choose to borrow will depend on their appetite for leverage and their deposit, buy if they are looking for greater leverage there are ways to secure that even based on the same deposit.

    When it comes to refurbishment projects, some lenders will base the maximum LTV to which they lend on the purchase price of the property prior to the renovations. Other lenders like Castle Trust Bank, however, are able to base the LTV on the price the property is likely to achieve once the refurbishment has been completed. This could mean that an investor is able to borrow more at the outset, which may give them enough of a contingency to ensure they can meet the rising costs of a refurbishment and successfully complete the project without any unnecessary hold ups.

    So, if your clients are concerned about the rising costs of construction, look into ways you could secure them a greater contingency and provide them with greater confidence for their refurb projects.

    Rob Oliver, Sales Director at Castle Trust Bank

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  • 23/09/2021 | Intermediaries News

    Castle Trust agrees £13.2m development loan for BTR scheme

    We're delighted to be providing funding for this exciting project in Dagenham, consisting of an innovative 60+ unit PRS scheme.

    As originally published in Specialist Finance Introducer 

    Specialist property lender Castle Trust Bank has agreed a £13.2m development loan with Laner Ltd, for a commercial and residential build-to-rent (BTR) scheme in Dagenham.

    The OXLO project, being developed by Barking Dog Developments Ltd, will provide ground floor commercial space, plus residential apartments for private rent.

    The project requires the demolition of an existing warehouse and the redevelopment of the site to provide 63 residential units, including studio flats, one and two-bedroom flats, and one-bedroom maisonettes.

    The project will also provide over 350 square metres of mixed commercial space, together with associated car parking spaces and communal areas.

    Simon Whitfield, Head of Development finance at Castle Trust Bank, said: “We’re delighted to be providing funding for this exciting project in Dagenham.

    “The development is ideally situated, and there will be high demand for the units once they become available to rent.

    “We’ve provided finance for projects undertaken by Barking Dog Developments before, and continue to be impressed by their experience, professionalism and expertise.”

    Kirk Pickering of Barking Dog Developments Ltd added: “We are delighted to have concluded development funding with Castle Trust Bank for the OXLO Project, an innovative 60+ unit PRS scheme in east London.

    “They supported the delivery team and understood the product, which is a continuation from a previous project also funded by Castle Trust Bank.”

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  • 20/08/2021 | Intermediaries News

    Less is more for Buy to Let landlords

    With rents reaching record highs but tax changes slowing down investment purchases, Rob Oliver, our Sales Directors shares his thoughts on the outlook of the Buy to Let market and how diversifying product portfolios could hold to key to landlord success.
    As originally published in Financial Reporter

    There are few areas of the market that seem to attract as much speculation as Buy to Let. Despite the fact that private rental accommodation accounts for more than a fifth of the UK’s total housing stock, the arrival of any new piece of regulation or tax change seems to trigger a wave of commentary hailing the beginning of the end for the investment.

    It is true that the tax changes introduced in 2016, which saw a 3% surcharge added to the stamp duty on a Buy to Let purchase and tapering of relief on mortgage interest payments, discouraged a lot of landlords from entering the market or growing their portfolio. In fact, according to research by Hamptons International, landlords have bought 26% fewer properties in the last five years than they would have done had the tax changes not been introduced. Hamptons says that landlords have bought around 700,000 properties since April 2016, which they suggest is 250,000 fewer than they would have if the tax regime had stayed the same.

    This, however, is not bad news for those landlords who have remained committed to the market. Demand for rental property continues to grow and so any restriction of supply merely underpins rental prices.

    The latest data from Rightmove shows the biggest annual and quarterly increases in rents the property website has ever seen. Rightmove says that national asking rents outside London have jumped by 6.2% year on year to reach more than £1,000 a month for the first time on record. London is the only region where rents are lower than this time last year, but the capital has bounced back, with rents increasing this quarter for the first time since before the pandemic. The website adds that tenants are being found for properties at the fastest rate on record, with the average time taking just 21 days, and that this is leading to a 36% annual fall in the number of available rental properties.

    So, where does this leave the outlook for Buy to Let? Landlords have undoubtedly had to absorb a financial hit over the last years, with many tenants unable to meet their full rental commitment, but as we emerge from the pandemic, it’s hard to argue against the potential for a Buy to Let investment given the imbalance between supply and demand. One way that investors are continuing to benefit from the market, whilst also mitigating against increased costs is by diversifying their property portfolio. Investments such as HMOs, multi-unit blocks and holiday lets can deliver higher yields than a property let on a standard AST and we are seeing increasing demand from brokers whose clients are accessing these investments for the first time.

    Increased regulation and taxation mean that Buy to Let may have not grown as much as it could have, but less is proving more for many landlords, who are benefiting from increased rental growth and exploring more diverse and profitable portfolios.

    Rob Oliver, Sales Director at Castle Trust Bank

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  • 04/08/2021 | Intermediaries News

    Give property developers control in a rising market

    House prices have risen by nearly 10 per cent in the last year, according to the Halifax House Price Index and values are expected to keep on growing.
     
    The latest report said that “the current strength in house prices points to a deeper and long-lasting change”. 

    As always, beyond the national picture there are also more local regional trends. Property prices in Greater London, for example grew by just 3.1 per cent in the last year, according to the index, as demand for city living dropped in favour of larger homes with more outside space in more rural areas. 

    The top-line rate of house price inflation is good news for developers of course, but it also poses a problem.  

    Once they have completed a scheme, are they better off selling all the units while the market is hot or holding on to some to benefit from additional capital gains?  

    In addition, for those investors building units in London, there’s a question as to whether they would be better off holding on until the lifting of all lockdown restrictions when smaller properties close to amenities are likely to be more in demand. 

    Timing is everything when it comes to investing and so the ability to have more control over when to make a sale can be a very powerful tool for developers.  

    So, how can developers achieve greater control over when they sell some of their units? 

    Gaining control 

    One way of doing this is to use bridge-to-let.  

    The bridging element of bridge-to-let can be used as a development exit loan to refinance the scheme that is completed or nearing completion, often at a lower rate than the development finance facility.

    Then, when the properties are ready, the developer can choose to switch all the properties onto a buy-to-let loan and let the properties to tenants, perhaps with the intention of selling at a later date.  

    Or, if they choose, they could sell some properties now and switch some onto the buy-to-let loan, reducing the outstanding balance in the process. 

    Some lenders can also structure clever hybrid loans that give developers even greater flexibility.   

    For example, a development exit loan which has a hybrid solution that combines a serviced loan and a bridge.  

    The loan can be split at the outset between a bridging loan on some properties that are being marketed for sale and a fixed rate loan with serviced interest on those that were being retained to let out.  

    Once the term ends, the bridging loan can be converted to a serviced loan without an early repayment charge (ERC), enabling the client the flexibility to choose whether to deleverage at this stage or to service the debt. 

    The current market is encouraging increased activity from developers and the use of bridge to let, or a structured hybrid loan, can prove an important tool to give them the control they need to maximise their returns. 
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  • 04/08/2021 | Intermediaries News

    Continued opportunities with changing permitted development rights

    Permitted development has proven to be a rich vein of opportunity for investors in recent years, as the government’s appetite to increase housebuilding has driven changes that make it easier for developers to convert property from commercial to residential use.

    Until recently, this opportunity has most widely been used to change office blocks into large residential blocks, but this trend for permitted development looks set to change following new legislation this year.

    From 1 August, the amount of floorspace which can change use under permitted development will be limited to 1,500 square metres and this effectively means the era of easily converting large office buildings is coming to an end. There will, of course, continue to be opportunities where planning permission is granted, but the rate of large office to residential conversion will undoubtedly slow.

    One of the reasons for this change is that the government wants to focus more investment on revitalising England’s beleaguered high streets, and earlier this year, the government announced its plans to streamline the planning system to make it easier for buildings to convert between commercial, business and service uses, such as shops, restaurants, banks, gyms and offices, without the need for planning permission. As part of this, it will also enable more commercial, business and service premises on high streets to be converted into residential without planning permission. In order to qualify, the commercial premises must have been in a commercial business and service use for two years and vacant for three months before any conversion can be considered.

    The idea is that, by making it easier to convert smaller disused properties, the government can help to stimulate investment back into high streets, creating mixed-use areas and attracting new businesses. The relaxation of development rules is part of a package of measures designed to revitalise high streets and other measures include a new fast track for extending public service buildings including schools, colleges, universities and hospitals; relaxation of planning rules to allow pubs and restaurants to operate as takeaways; longer opening hours for retail to provide flexibility and reduce pressures on transport; and extending the provisions for temporary pavement licences.

    The concept of regenerating high streets by encouraging residential development alongside commercial businesses is one that makes a lot of sense. The reality, however, as always will hang on the detail. The right mix of commercial and residential is essential to create an area in which people actually want to live, and lenders are likely to want to know the detail of the commercial outlets that neighbour potential developments. A high-end townhouse may have limited appeal if it is next to a kebab shop.

    The key for developers is always proper planning – even if planning permission is not required – and an attention to detail that creates the right environment for success. For brokers, it’s important to start working with your clients at an early stage of their scheme, to understand their plans and requirements, so that you can then engage a lender early-on to help ensure the project is on the front foot right from the start. Depending on the nature of the project, your clients may require development finance or they could be able to complete the conversion with a bridging loan that enables refurbishment. A lender, like Castle Trust Bank, that offers a full range of loans for property investment, will be able to talk through what type of funding arrangement is required. It could also provide you with longer term options in the form of Bridge to Let should your client want to hold onto some or all of the completed properties for rental income.
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  • 08/07/2021 | Intermediaries News

    We discuss Holiday Let applications in the last of four Specialist Lending Solutions videos

    Castle Trust Bank's Rob Oliver, Dak Lam of Sirius Group and Damian Cain of Complete Financial Services finish their discussion by talking about the quality of Holiday Let applications, and what lenders are looking for.

    You can see the video, which is about 10 minutes long, on Castle Trust Bank's YouTube channel here
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  • 08/07/2021 | Intermediaries News

    We move on to Holiday Let upgrades in the third of four Specialist Lending Solutions videos

    Castle Trust Bank's Rob Oliver, Dak Lam of Sirius Group and Damian Cain of Complete Financial Services discuss how investing in a refurbishment of a Holiday Let can drive higher yields.

    You can see the video, which is about 10 minutes long, on Castle Trust Bank's YouTube channel here
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  • 08/07/2021 | Intermediaries News

    We discuss Holiday Let products in the second of four Specialist Lending Solutions videos

    In the second of four short Mortgage Solutions videos sponsored by Castle Trust Banks, Rob Oliver, Dak Lam of Sirius Group and Damian Cain of Complete Financial Services discuss how specialist lending products are evolving to meet the requirements of property investors.

    You can see the video, which is about 10 minutes long, on Castle Trust Bank's YouTube channel here
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  • 08/07/2021 | Intermediaries News

    We discuss Holiday Let demand in the first of four Specialist Lending Solutions videos

    In the first of four short Mortgage Solutions videos sponsored by Castle Trust Banks, Rob Oliver, Dak Lam of Sirius Group and Damian Cain of Complete Financial Services discuss the increased demand for UK Holiday Lets, and how brokers and lenders can work towards helping to meet the requirements of property investors.

    You can see the video, which is about 10 minutes long, on Castle Trust Bank's YouTube channel here
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  • 28/05/2021 | Intermediaries News

    The outlook is positive for investors in student accommodation

    It’s stating the obvious to say that, over the last year, the pandemic has had a major impact on the student rental market, but what does the future hold for investors in this sector? And what does that mean for your business?

    Analysis by lettings platform, Goodlord, has found that during 2020, revenues from student lets dropped by 30 per cent compared to figures from 2018 and 2019.

    Student accommodation is predominantly let by students in their first year and with so many students choosing to defer their university studies, or live at home whilst learning is remote, demand has naturally dropped – and this has impacted prices. Goodlord says that during 2018 and 2019, the average monthly rental price of a student property was £1,265. In 2020, it was £1,012 – a fall of 20 per cent on average across England and Wales.

    The outlook, however, looks positive. Where students deferred entry last year, the demand for university places this September is likely to be higher than usual – and, of course, the fast pace of the vaccination programme means that all students should have had the opportunity to be vaccinated by the time the term begins.

    According to Knight Frank analysis of UCAS data, early indicators are that there will be an 8.4 per cent increase in university applications for the 2021/22 academic year compared to 2020/21.

    This is the highest comparable year-on-year increase since 2010, and Knight Frank says it is driven predominantly by an increase in UK applications, which are 11.6 per cent higher than last year. The rise coincides with an increase in the UK population of 18-year olds – the first time in six academic cycles where this has been the case.

    Global reach

    Despite the pandemic, there is also anticipated to be an increase in applications from international students residing outside of the UK. In 2020/2021, this number increased by 17.1 per cent on the previous year, driven by particularly strong demand from China and India. High-end purpose-built student accommodation remains especially popular with overseas students who may be unfamiliar with the local housing market.

    Another trend that will be important for investors in this sector to note is the differences in demand for places at universities in different cities, and across different groups and tiers of universities.

    Since 2012, demand by students to study at higher tariff universities – which typically demand higher exam grades for entry – has increased much faster than demand for lower tariff universities. Consequently, while student numbers at lower tariff universities have remained flat since 2012, they have grown by 25 per cent at higher tariff institutions – and this naturally has an impact on the demand for accommodation.

    So, while investors in student accommodation have taken a hit in the last year, the ongoing strong demand from students, particularly from overseas students, and particularly at well-regarded universities, paints a positive picture for the future. Indeed, some investors may see opportunity in snapping up distressed stock now with the hope of benefitting further down the line – and this presents opportunity for you.

    There continue to be lenders with an appetite for student accommodation and product options, such as bridge to let, that can provide investors with flexible finance to buy, renovate or repurpose a property before switching onto longer term funding when it is ready to be let.

    This combination of strong student demand and competitive lending options means there continue to be opportunities in student lets.

    Read more
  • 27/05/2021 | Intermediaries News

    Bridge to Let - what exactly is it, and how can it be used?

    We're receiving so many queries about our Bridge to Let product, it would be easy to think that everyone understands what it is, and how it can be used. But I'm sure that's not the case - and I'm equally sure that an explanation would help many of you! So grab yourself a coffee, sit down, and spend a few minutes finding out how Bridge to Let can meet so many of your clients' needs...

    What is Bridge to Let?

    Bridge to Let is a clever product that combines a bridging loan and a Buy to Let mortgage. It enables property investors to purchase a rental property that they might struggle to finance with a term mortgage, complete any necessary changes required to make it mortgageable and then switch onto a pre-approved Buy to Let mortgage once the property is ready to be let out for rental income.

    With Bridge to Let the two funding facilities can be approved with one application process, which means no doubling up of work and no extra costs or delays.

    Popular uses for Bridge to Let

    Light Refurbishment

    One way for property investors to maximise their Buy to Let returns is by purchasing a property that requires some work in order to make it fit for purpose, carrying out the work, and then letting the property.

    Light refurbishment is the term used for a property renovation that requires no planning permission or building regulations and where there is no change of use to the property, and commonly includes renovations like a new bathroom, new kitchen, redecoration, rewiring or new windows.

    A light refurbishment of a property is a good way of adding both capital and rental value to the property without having to undergo significant structural changes. After all, a new kitchen and bathroom and some decorative work can transform an otherwise undesirable property and help the property to command a premium on the rental market.

    Some Bridge to Let lenders can also factor in the value uplift resulting from any renovations when it comes to agreeing the terms of the Buy to Let mortgage.

    Conversion to HMO

    HMOs are a popular way for landlords to increase their ongoing rental income and so one way for a property investor to increase their returns is to buy a property and carry out work to convert it to an HMO.

    An HMO is a building that is not entirely comprised of self-contained flats and where the occupants share one or more of the basic amenities (defined as a toilet, personal washing facilities and cooking facilities). A typical HMO might be a student house that is let to a number of different students, but HMOs are also popular close to city centres amongst young professionals and near to hospitals for medical and maintenance staff. An important consideration for landlords purchasing an HMO investment is think about the location of the property and the potential to let it as an HMO, as some areas will be inappropriate for this type of investment, and there are clearly some questions around the demand for student accommodation for the foreseeable future.

    It is also worth remembering that there is now mandatory licensing for all HMOs that are occupied by five or more people from two or more households. And, as part of this mandatory licencing, there are minimum room sizes for bedrooms in licenced HMOs.

    Investors buying a property with the intention of letting it as an HMO will usually need to carry out some work to make the property fit for purpose, and this is where the s Bridge to Let loan can come in. The initial bridging loan can be used to purchase the property and carry out the work, before switching it to a Buy to Let mortgage when the work has been completed and the building is ready for tenants.

    Development Exit Loans

    Bridge to Let can also be used as a development exit loan, putting developers in a position where they have greater control over when they choose to sell in order to achieve the best price.

    The bridging element of Bridge to Let can be used as a development exit loan to refinance a scheme that is completed or nearing completion, often at a lower rate than the development finance facility and can also free up capital that a developer can use to start their next project.

    Then, when the properties are ready for tenants, Bridge to Let can switch over to longer-term funding. This approach is particularly useful for developers who complete their schemes during a downturn in the purchase market when they might not achieve as much from the sale of a property as they would have hoped. By letting out the properties, rather than selling as soon as they are ready, developers have greater control over when they choose to sell, so can ride out any downturn and plan their exit strategy at a time when they are most likely to achieve the best price.

    What are the benefits?

    There’s little doubt that bridging can provide property investors with a lot of freedom. It can be fast and flexible, and deployed where it may be difficult, or impossible, to secure a standard term mortgage. But it can also be uncertain as the underwriting of a bridging loan is dependent on the validity of the exit route. And, in the current environment, investors may have concerns about their ability to refinance a bridging loan onto a buy to Let mortgage in six to 12 months’ time.

    Bridge to Let removes this uncertainty as the exit route is underwritten and pre-approved upfront, so it can provide investors with more peace of mind than separately sourcing a bridging loan and then a Buy to Let mortgage. This makes it more suitable for less experienced investors who are embarking on one of their first refurbishment projects and can also prove invaluable in helping experienced portfolio landlords to plan with more certainty.

    In addition to peace of mind, Bridge to Let can deliver a great deal of efficiency to the process of financing a property investment. As both the short-term and longer-term funding are both secured at the outset, there is no need to go through the full application again. For brokers, this means there is no doubling up of your work or additional and potentially costly delays for your clients, which is particularly welcome at times like this.

    At any time, Bridge to Let is a straightforward process that can provide investors with more flexibility and greater peace of mind, but in the current environment, it is becoming an even more essential tool for brokers. With brokers reporting record levels of demand and many lenders working at reduced capacity to facilitate Covid measures, there are frequent stories of applications hitting frustrating delays, both when it comes to bridging finance and term funding. Set against this backdrop, with one application process rather than two, Bridge to Let can provide a far more efficient route to finance for property investors and put them in a stronger position to make the most of any opportunities that the market presents.

     

     

     

     

     

     

     

     

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  • 18/05/2021 | Group News

    Our latest financial statements - September 2020

    Castle Trust has published its latest financial statement, as at 30 September 2020.

    Castle Trust has published its latest financial statement, as at 30 September 2020. The full detail of the statement can be found in the FY 30 Sept 2020 CTH Financial Statements and you can download a copy of the following summary of Castle Trust Bank's Financial Strength.

    The financial year ending September 2020 was a pivotal year for Castle Trust as we achieved our ambition to become a bank. Converting all our investment accounts into savings accounts was a key step on this journey, with an overwhelming majority of these customers voting in favour of the proposals. The PRA and FCA granted our full banking licence on 15 June 2020.

    The Group is strongly capitalised with total equity of £79.2 million, total assets of £742.1 million and liquid assets of £153.8million . In the financial year to September 2020, Castle Trust Bank made a profit before tax of £0.8m. Castle Trust Bank now has an even stronger platform to offer a greater range of services to both our savers and our borrowers. We are a provider of savings, mortgage and consumer lending products, employing over 200 people across our offices in Basingstoke and London. Our principal shareholder is the leading private equity firm J.C. Flowers & Co., which currently manages circa $6 billion in assets.

    Savings
    As at 30 September 2020, our c20,000 customers held just under £650 million of fixed term, fixed rate savings with us. Existing customers have been able to save into new accounts since November 2020.

    Lending
    As at 30 September 2020, Castle Trust Bank’s total property finance loan book stood at over £450 million. The introduction of the TermTen product which combines fixed rates and refinance options, and the Bridge to Let option which combines a bridging loan and TermTen into a single arrangement have proved very successful within the market.

    Retail Finance
    Working with over 1,500 retailers and 160,000 customers, as at 30 September 2020 the retail finance loan book for Omni Capital Retail Finance (‘Omni’) stood at over £115m.

     

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  • 15/03/2021 | Intermediaries News

    BTL is still a very attractive investment, despite tax reforms

    There were two news stories in the trade press on the same day recently, each painting a very different picture of the outlook for Buy to Let. Were either, or both, correct?

    There are few areas of the market that attract as much speculation as Buy to Let, and much of it is contradictory.

    On the same day last week there were two news stories in the trade press that each painted a very different picture of the outlook for Buy to Let.

    In one story, a survey of more than 1,000 landlords by FJP Investment found that 68% of multiple property owners believe Buy to Let investments have become "far less attractive" over the past five years, with 71% believing they have been unfairly targeted by the Government through tax reforms and new regulations since 2016.

    At the same time, criteria specialist, Knowledge Bank revealed that the most searched-for term by brokers in February was ‘first-time landlords’ and that this was actually the tenth month in a row when it made the top five criteria searches.

    So, what’s the truth? Is Buy to Let less attractive than it has been in the past or is it attracting new investors?

    In reality, it’s probably a bit of both.

    After all, landlords have been hit by an increasing tax burden in recent years, which is why so many are looking to different types of Buy to Let investment that can deliver stronger yields – such as holiday lets, HMOs and refurbishment projects.

    However, Buy to Let remains an appealing investment for landlords who are prepared to take a long-term view. It’s often said that bricks and mortar become more popular during a downturn, rather than equities, as they at least provide investors with a tangible asset, and this certainly seems to be the case at the moment.

    Whatever news story you read about Buy to Let, positive or negative, it’s always worth referring back to the fundamentals that underpin this market. The UK private rental sector provides accommodation for a fifth of all households. It has become an integral part of our housing stock and will remain so. And we continue to have a housing deficit in this country, with demand for housing vastly exceeding supply.

    These are the two key factors that mean, whatever the latest survey says, ultimately, Buy to Let is here to stay.

    Read more
  • 15/03/2021 | Intermediaries News

    Castle Trust Bank strengthens Sales team

    Castle Trust Bank has strengthened its Sales team with the appointment of Paula Dowson in the newly created role of Regional Account Manager for the North of England.

    Castle Trust Bank has strengthened its Sales team with the appointment of Paula Dowson in the newly created role of Regional Account Manager for the North of England.

    Paula has more than 20 years’ experience in financial services, working in both high street and specialist lenders, including Glenhawk, Together, and Northern Rock. In the new position of Regional Account Manager for the North of England, Paula will help to consolidate and expand Castle Trust Bank’s footprint across the whole of England and Wales.

    Rob Oliver, Sales Director at Castle Trust Bank, said: “I’m delighted that Paula has joined Castle Trust Bank. Having worked with her before, I know that she will quickly become a huge asset to the business, helping us to increase our reach to a greater number of brokers, enabling even more Buy to Let investors to access the finance they need to maximise their returns.”

    Paula Dowson, Regional Account Manager for the North of England at Castle Trust Bank, added: “I’m excited to be joining Castle Trust Bank. It’s a lender with a reputation for being ambitious and innovative in the solutions it delivers to property investors, and I’m very much looking forward to introducing them to both existing and new contacts in the North.”

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  • 04/03/2021 | Intermediaries News

    Castle Trust Bank partners with Legal & General

    Castle Trust Bank has partnered with Legal & General Mortgage Club to enable more brokers to access its range of specialist Buy to Let products.

    Castle Trust Bank has partnered with Legal & General Mortgage Club to enable more brokers to access its range of specialist Buy to Let products.

    Legal & General Mortgage Club members now have full access to Castle Trust Bank’s Buy to Let mortgages, bridging and development finance, which are available to UK residents, ex-pats, foreign nationals, SPVs and trading companies.

    Castle Trust Bank offers loans for a variety of investments, including holiday lets, HMOs, portfolio loans and property refurbishment, and its proposition includes Bridge to Let, which provides brokers with the built-in certainty of a confirmed exit route at the outset.

    Rob Oliver, Sales Director at Castle Trust Bank, said: “2021 is going to be a big year for Castle Trust Bank, and this is a great way to start. We are really pleased to partner with Legal & General Mortgage Club to offer our full range of specialist But to Let, bridging finance and development finance to its members. We have built our specialist Buy to Let proposition on delivering certainty to brokers and their clients. Our BDMs provide certainty at the outset, with instant terms on term loans up to £500k, and our Bridge to Let proposition delivers certainty at redemption with a guaranteed exit route. This is a very important partnership for us, and it will help more brokers to access the certainty they need.”

    Danny Belton, Head of Lender Relationships at Legal & General Mortgage Club, said: “Castle Trust Bank has always been an innovator in the Buy to Let market, building a reputation on certainty of funds and flexible underwriting. It’s another great addition to the Legal & General Mortgage Club lender panel and I am looking forward to working in partnership with the Castle Trust Bank team to provide our members with access to its specialist lending proposition.”

    Details are available here.

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  • 01/03/2021 | Intermediaries News

    Castle Trust Bank completes £9.6m hybrid loan

    Castle Trust Bank has completed a £9.6m development exit loan, structuring a hybrid solution that combines a serviced loan and a bridge.

    Castle Trust Bank has completed a £9.6m development exit loan, structuring a hybrid solution that combines a serviced loan and a bridge.

    The specialist lender worked together with Sirius Property Finance to complete the transaction which will enable the client to sell a proportion of the properties and retain the rest to let to tenants.

    The £9.6m loan has been secured on a block of 69 one- and two-bedroom apartments in a five-storey commercial to residential conversion in Birmingham. Constructed under permitted development, the scheme in Four Oaks, Sutton Coldfield has been valued at £13.2m and the LTV was 73%.

    The loan provided by Castle Trust Bank is split at the outset between a bridging loan on the properties that are being marketed for sale and a five-year fixed rate loan with serviced interest on those that are being retained to let out. After nine months, the bridging loan will also convert to a serviced loan, enabling the client the flexibility to choose whether to deleverage at this stage or to service the debt.

    Rob Oliver, Sales Director at Castle Trust Bank, said: “This case is an excellent example of the type of bespoke deal we are able to structure at Castle Trust Bank. The client wanted the flexibility to sell some of the units but also a sustainable solution that would allow them to retain the majority of the units for ongoing income. We worked together with the team at Sirius to deliver this solution, which gives the client the surety of a Buy to Let loan and the flexibility to deleverage when some of the units are sold – and all at a very competitive rate.”

    Nicholas Christofi, Managing Director at Sirius Property Finance, said: “It’s always a pleasure to work together with a lender on a deal like this, which is structured to give a client exactly what they need. Castle Trust Bank weren’t put off by the large loan size or complex nature of the requirements and worked in partnership with our team to deliver an excellent solution for our client.”

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  • 24/02/2021 | Intermediaries News

    Expect to see more demand for bridge-to-let products – Rob Oliver

    Landlords have needed to adapt to a continuously changing set of taxation and regulation considerations, so they are arguably in good shape to negotiate the evolving landscape as a result of Covid-19. Our Director of Sales, Rob Oliver, goes into more detail...

    As originally published in Mortgage Solutions

    The pandemic will impact property investors in a number of direct and indirect ways.

    Many landlords, for example, have already experienced a direct loss of income as the economic effect of multiple lockdowns has led to more tenants missing rent payments.

    A more indirect consequence could be the potential increase to Capital Gains Tax the chancellor is reportedly considering as a means of helping to repay the vast cost of the last year.

    Either way, it seems reasonable to assume the trend will continue for investors to explore options with the potential to deliver better returns to offset increased costs.

    Maximise returns with refurbishments
    One way for property investors to maximise their buy-to-let returns is by purchasing a property that requires some work to make it fit for purpose, carrying out the work, and then letting it out.

    It’s often the case that a property considered uninhabitable, and therefore unmortgageable, could be made habitable with relatively straight forward light refurbishment, providing there is no structural work or planning required, so, bridging finance is a valuable tool in this area of the market. But one area of concern for brokers is whether there will be a suitable buy-to-let product available that enables their client to exit the bridging loan on time once the work is complete.

    This is likely be a growing concern this year as term lenders tread carefully in the uncertain economic environment.

    With this in mind, expect to see more demand for bridge-to-let products, which combine the short-term finance to complete any necessary changes required to make a property mortgageable with a pre-approved buy-to-let mortgage once the property is ready to be let out for rental income.

    Service levels and value increase
    With bridge-to-let loans the two funding facilities can be approved with one application process, which means no doubling up of work, no extra costs and no delays.

    This could also prove particularly useful this year as continued remote working means service levels will remain a key consideration.

    Some lenders can also factor in the value uplift resulting from any renovations when it comes to agreeing the terms of the buy-to-let mortgage.

    We are also likely to see a shifting demand in the types of property refurbishment carried out by investors to meet the changing requirements of renters.

    More people are looking to move to larger properties outside of major conurbations, and the supply of good rental property in these areas is often limited.

    So, there will be opportunity for investors to satisfy the changing demands of the rental market by updating the housing stock in more rural locations.

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  • 18/02/2021 | Intermediaries News

    Castle Trust Bank joins PMS and Sesame panels

    Castle Trust Bank has been added to the lender panels of PMS Mortgage Club and Sesame Network.

    Castle Trust Bank has been added to the lender panels of PMS Mortgage Club and Sesame Network. Members of PMS and Sesame now have full access to Castle Trust Bank’s Buy to Let mortgages, bridging and development finance, which are available to UK residents, ex-pats, foreign nationals, SPVs and trading companies.

    Castle Trust Bank offers loans for a variety of investments, including holiday lets, HMOs, portfolio loans and property refurbishment, and its proposition includes Bridge to Let, which provides brokers with the built-in certainty of a confirmed exit route at the outset.

    Rob Oliver, Sales Director at Castle Trust Bank, said: “We are really pleased to partner with Sesame and PMS and offer our full range of specialist But to Let, bridging finance and development finance to their members. Certainty is vital for brokers in the current environment and at Castle Trust Bank, our proposition is built on delivering certainty – from our BDMs offering instant terms on term loans up to £500k, through to our Bridge to Let proposition providing a guaranteed exit route. With this important partnership, we are looking forward to delivering more certainty to even more brokers.”

    Stephanie Charman, Specialist Lending Relationship Manager at Sesame and PMS, said: “We’re delighted to welcome Castle Trust Bank to our panel to offer our members more options to place their specialist Buy to let and bridging. Castle Trust Bank has built a reputation of delivering clarity of decision, certainty of funds and flexible underwriting, and this will be a very useful combination for our members and their clients.

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  • 04/02/2021 | Intermediaries News

    What do the government plans on leasehold reforms mean for developers?

    At the beginning of the year, the government announced its plans to reform the leasehold system to put more power in the hands of leaseholders. So what are the considerations for developers?

    As originally published in Property Explorer

    At the beginning of the year, the government announced its plans to reform the leasehold system to put more power in the hands of leaseholders. So, what did the guidance include, how long might it take to become law, and what are the considerations for developers?

    There are 4.5 million leaseholders in the UK, who own a property where they are required to pay ground rent to the freeholder. The government has previously committed to restricting ground rents to zero for new leases, and these new reforms tackle the issues of existing leases.

    The proposed changes mean that both house and flat leaseholders will be able to extend their lease to a new standard 990 years and no longer have to pay ground rent to the freeholder.

    The cost of buying the freehold or extending a lease will also become cheaper and more transparent, with prescribed rates and an online calculator to help leaseholders find out how much it will cost them. Under the proposals, marriage value clauses, which entitle the freeholder to a percentage of the value increase of a property when its lease has been extended, will be abolished and leaseholders will be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’.

    The guidance also says that there should be no ground rent payable on retirement leasehold properties, so purchasers of these homes have the same rights as other homeowners – although to mitigate the potential impact on developers, commencement of this provision will be deferred and come into force 12 months after Royal Assent of the reforms.

    The government is also establishing a Commonhold Council – a partnership of leasehold groups, industry and government – that will prepare homeowners and the market for the widespread take-up of the commonhold model. Widely used around the world, the commonhold model allows homeowners to own their property on a freehold basis, giving them greater control over the costs of home ownership. Blocks are jointly owned and managed, meaning when someone buys a flat or a house, it is truly theirs and any decisions about its future are theirs too.

    At this stage, the reforms are government guidance and need to go through several stages of review and sign off before they become law, including review by the House of Commons, drafting of legislation and review by the House of Lords. There may also be multiple legal reviews during this process due to the huge loss of value to private investment firms and pension funds. Overall, the process could take up to five years.

    So, at this stage, the reforms are unlikely to have any real impact on developers. But it will be interesting to see how long term maintenance of the building will be covered off and what the effect will be on existing leases. I think change was inevitable given some developers had started over-charging leaseholders so however long this takes, it’s clear that the writing is on the wall for ground rent chargeable to leaseholders and developers should prepare for change.

    Simon Whitfield, Head of Development Finance at Castle Trust Bank

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  • 01/02/2021 | Group News

    Castle Trust Bank recruits new Sales Director

    Castle Trust Bank has recruited Robert Oliver to become the specialist lender’s new Sales Director.

    Castle Trust Bank has recruited Robert Oliver to become the specialist lender’s new Sales Director.

    Robert has more than 20 years’ experience in intermediary lending, having previously held roles with Northern Rock, Virgin Money, Capital Home Loans and most recently with Together, where he was Head of Intermediary Relationships.

    Castle Trust Bank offers bridging loans and term finance for a variety of investments, including holiday lets, HMOs, portfolio loans and property refurbishment. It also has a popular Bridge to Let proposition and a specialist development finance offering.

    Barry Searle, Managing Director of Mortgages at Castle Trust Bank, said: “I’m really pleased to welcome Robert as our new Sales Director. He has extensive experience in intermediary lending, and is well known in the industry. He has an important role to play in making our specialist Buy to Let and Bridge to Let loans, and development finance proposition available to even more intermediaries, through our growing distribution network.”

    Robert Oliver, Sales Director at Castle Trust Bank, said: “What a great time to be joining Castle Trust Bank. In the last year I’ve read a huge amount about the certainty it’s able to deliver to brokers, with BDMs providing instant terms on term loans up to £500k and the Bridge to Let proposition providing a guaranteed exit route. These features are going to be in high demand in 2021, and I am excited to now have the chance to lead the team that is taking them out into the market.”

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  • 25/01/2021 | Group News

    Castle Trust Bank recruits new CTOO

    Castle Trust Bank has recruited Nick Bennett as its new Chief Technology & Operations Officer (CTOO).

    Castle Trust Bank has recruited Nick Bennett as its new Chief Technology & Operations Officer (CTOO).

    Nick has more than 15 years’ experience in technology and banking, having worked at Tandem Bank for the last three years and Santander for 11 years previous to that. He has led strategic organisational and transformational programmes and has a wide range of knowledge and experience in leading technology, change and operations in the financial banking sector.

    He will join Castle Trust Bank on 29 March to lead the bank’s strategy and continuing investment and focus on technology, digitalisation and change. In the last year, Castle Trust Bank has supported its specialist Buy to Let and Bridging proposition with enhanced broker portal features, including full online case management, secure message and automatic certification of uploaded documents. Nick will lead the delivery of new developments to the bank’s property lending platform, savings offering and point of sale business, Omni Capital Retail Finance.

    Martin Bischoff, Chief Executive Officer at Castle Trust Bank, said: “At Castle Trust Bank, we have already launched a market leading savings app enabling savers to manage their money through the latest face and fingerprint recognition technology and Nick will play a key role in continuing the digital transformation of our business. This will include further developing our savings technology, delivering new point of sale finance products to our network of over 1500 retailers, and building on the success of our Bridge to Let proposition to increase our lending through our growing network of intermediaries.”

    Nick Bennett added: “I’m delighted to be joining Castle Trust Bank at such an exciting time for the business, following the receipt of its banking licence. I can’t wait to start working with the team to build on the amazing work they’ve already done and deliver on the next stage of Castle Trust Bank’s digital transformation.”

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  • 04/01/2021 | Intermediaries News

    Helping your clients to buy their first holiday let

    Buy To Let can prove to be a great investment, but how can you help your client find a lender if they don't have an existing track record with holiday lets? We explore how bridging can help provide the answer.

    For property investors on the hunt for better yields, there is little denying the appeal of a holiday let.

    Analysis of properties on Rightmove and using data from Airbnb shows that, in the East Sussex seaside town of Hastings, a typical one-bedroom flat close to the sea front would cost around £177,000. If let out on a standard buy-to-let basis through an assured shorthold tenancy (AST), that property might earn £725 per calendar month, or £8,700 over the course of a year. However, if it was let on a short-term basis, and even accounting for just a 54% occupancy rate, it could earn more than £17,000. That’s the difference between a yield of just under 5%, compared with a yield of just under 10%! There are obviously other costs and considerations in operating a holiday let, but it’s easy to see why so many investors are looking to move into the holiday let business.

    The trouble is, buying a first holiday let is not always that easy as many lenders will want a track record of previous holiday lets, or a track record that the property has been used for holiday lets. So, what’s the answer?

    One way to help your clients invest in their first holiday let is to use bridging to buy the property and then refinance onto a term mortgage once there is some track record in place. The downside of this is that it can prove expensive if your client is unable to secure a suitable exit route in good time. But what if you could secure the exit route at the outset?

    At Castle Trust Bank, we’ve seen a lot of demand for our bridge-to-let product from property investors who want to get up and running with their first holiday let. The benefit of this approach is that bridge-to-let offers a guaranteed exit onto a term loan at the outset, so the clients know they won’t be stuck on bridging finance indefinitely. In fact, if it’s possible to demonstrate the track record of the holiday let before the end of the bridging term, borrowers can switch over to the term finance sooner.

    With bridge-to-let, first-time holiday let investors benefit from the ability to access a new investment area with the confidence of a guaranteed exit and the added benefit of achieving that exit sooner if they are able to get up and running quickly.

    So, if you are thinking about helping your clients to buy their first holiday let, think about bridge-to-let.

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  • 02/12/2020 | Intermediaries News

    Term rate discount of 0.25% extended to the end of December

    We're delighted to be able to extend our 0.25% discount on term rates to DIPs issued by the end of December.
    The success of our 0.25% discount on term rates during November has been fantastic. It has shown just how much a combination of competitive rate, speed of service and sensible underwriting can give brokers and investors confidence in the current climate.

    Due to the success of our November offer, we're delighted that we are able to continue to apply the offer to all DIPs on term products issued until the close of business on 31st December. This includes our Bridge to Let proposition, where the option of a term plan is used to provide certainty for the exit route.
     
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  • 30/11/2020 | Intermediaries News

    A green approach to boosting investor returns

    Improving the energy efficiency of a property can help boost the value dramatically. Read on to see how much an improved EPC rating can help.

    Light refurbishment is a common way for property investors to increase their returns. Buying a run-down property, fitting a new kitchen and bathroom, changing the flooring and redecorating are relatively low-risk ways to increase the rental and capital value. But what else can an investor do to make sure they are maximising the property’s potential?

    Taking steps to make a property more energy efficient can increase its value by up to 13%, according to analysis by comparethemarket.com. The report found that homes with a higher rating on their Energy Performance Certificate (EPC) are worth more in all areas of the UK other than London and the South East, where any value uplift is negligible given that house prices are so high in this region. However, in the North East, houses with an A/B EPC rating are worth 13% more than those with a D rating, and in the Cotswolds an A/B EPC rating can add 8%. With research from the Mayor of London showing that one in seven Londoners wish to move out of London following the Covid crisis, improving the EPC level could be a cost-effective way to increase the rental or capital value of these properties.

    An EPC certificate will rate a property from A to G based on how energy efficient it is and as of 1 April 2018, all private rental properties in the UK must have an Energy Performance Certificate with a minimum rating of E. The best ways of improving the rating, and the value of the property, are increasing loft insulation, adding double glazing, adding cavity wall insulation and draught proofing.

    Taking steps like these can be a cost effective, and green, way for property investors to add value to their investment, and for investors who are quick, there is even the potential to secure a grant to help with the costs.

    The Green Homes Grant provides a voucher that will cover two-thirds of the cost of eligible improvements to a property up to a maximum government contribution of £5,000. It’s available to landlords as well as residential homeowners, but the current scheme requires that vouchers must be redeemed and improvements completed by 31 March 2021.

    With or without the grant, the energy efficiency of a property should be a consideration as part of any refurb project. Not only will it help the environment, it will help to make the property more attractive to potential tenants or purchasers, and tenants will realise an ongoing benefit in the form of lower energy bills.

    For investors who are considering a property refurbishment, a product like Bridge to Let offers the upfront flexibility to enable the works to be carried out, with the peace of mind of a guaranteed exit once they are completed and the property is ready for tenants.

    With Bridge to Let the two funding facilities can be approved with one application process, which means no doubling up of work and no extra costs or delays. So, on a project like this, it’s not just the property that can become more efficient, but also the funding process.

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  • 06/11/2020 | Intermediaries News

    All term rates cut by 0.25% during November in limited period offer

    The second lockdown has made what is a tough time for everyone even tougher. But the property market remains open for business, and we're delighted to be able to help by offering a 0.25% discount to all decisions in principle (DIPs) issued on term products during the rest of November.

    One of the many advantages of becoming a bank is that it gives us greater flexibility to make changes to products and pricing where we identify demand in the market. A second lockdown is something that nobody wanted, but the property market remains open for business and there will continue to be opportunities for investors.

    To help investors to make the most of those opportunities and continue to stimulate activity in the market, we have reduced all rates on our term products by 0.25% for the rest of the month of November.

    The discount applies to Castle Trust Bank term products across a range of uses and can include property refurbishment as part of a term product or, where an investor would rather consider the value uplift in the term finance arrangement, on our Bridge to Let proposition.

    At Castle Trust Bank, we currently offer Buy to Let mortgages to UK residents, ex-pats, foreign nationals, SPVs and trading companies, with loans available for a variety of investments, including holiday lets, HMOs and portfolio loans.

    The limited period discount of 0.25% applies to all DIPs on term products that are issued until the close of business on 30th November.

    And don’t forget, we are still offering Buy to Let lending up to 75% LTV, with instant terms available from our BDMs. You can find your local BDM here.

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  • 06/07/2020 | Intermediaries News

    Cutting through the noise with clarity

    As with many lenders, Castle Trust Bank took the decision to manage its risk appetite during lockdown, but now as restrictions are being lifted, we are re-introducing criteria to meet the demand from brokers.

    At Castle Trust Bank we recently launched new criteria to reflect that the Government’s COVID Alert Level has been reduced to Level 3.

    As with many lenders, Castle Trust Bank took the decision to manage its risk appetite during lockdown, but now as restrictions are being lifted, we are re-introducing criteria to meet the demand from brokers.

    A key part of this process is acknowledging that, in the current uncertain environment, as the country is still tentatively emerging from lockdown, we have an appetite to lend, but not quite such an expansive appetite as we did prior to the pandemic.

    It’s only sensible that any lender, or any business for that matter, takes a more vigilant approach to risk at the moment – we are in unprecedented times and we need to tread carefully. But it’s rare that lenders actually acknowledge this.

    There’s still an awful lot of noise being made about lenders being open for business and the deals they are writing – but I haven’t seen much to actually help brokers place their cases.

    At a time when so much is changing, so frequently, brokers and their clients don’t need more noise, they need more clarity. Which is why we have taken the decision to be very clear and open about our lending appetite so that brokers know exactly where they stand.

    We will continue to investigate new opportunities to expand our offering as and when the COVID Alert Level falls in the future and in response to how the economy reacts.

    These changes are unlikely to be accompanied by big bang launches and bluster in the trade press, but they will be clearly communicated so that brokers understand exactly what we will, and what we will not, lend on at the time.

    Unfortunately, we can’t provide a prediction of exactly what will happen in the future, but we can provide some clarity about what options brokers will have as and when things change. We think that this provides a sensible approach to communicating and lending, not more noise. And that’s what brokers need to navigate this difficult situation.

     

     

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  • 19/06/2020 | Group News

    Castle Trust rebrands as Castle Trust Bank

    Following the receipt of a full banking licence and the successful conversion of all of its existing investments into savings accounts, Castle Trust is pleased to launch its new brand identity.

    Following the receipt of a full banking licence and the successful conversion of all of its existing investments into savings accounts, Castle Trust is pleased to launch its new brand identity.

    The firm will now operate as ‘Castle Trust Bank’, with a new logo and revamped website to showcase the new offering.

    The company will initially offer savings products to existing customers reinvesting maturing funds and expects to launch new savings products for new customers in late July.  The existing specialist property lending and Omni Capital Retail Finance arms will continue to offer the same services, with enhanced offerings to come later this year. The business expects to grow its specialist lending arm significantly as the market emerges from Covid19, working with brokers to respond to borrower needs and reaching more brokers through clubs and networks.  There are also plans to expand the Omni Capital Retail Finance offering later in the year.

    Martin Bischoff, Chief Executive Officer said: “This was a natural next step for us.  Castle Trust has come a long way since the company was founded, growing to serve 200,000 borrowers and savers so we already benefit from a loyal customer base, who have indicated that they would like to do more business with us as we enhance our product range.  As we step into the banking world, it seemed fitting that our brand would evolve to reflect that change too. Becoming ‘Castle Trust Bank’ sets out our stall as a fixture within the banking industry and gives us a platform from which to launch our new propositions.“

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  • 15/06/2020 | Group News

    Castle Trust granted full banking licence

    Following a period of authorisation with restrictions, Castle Trust Capital plc (Castle Trust) has been granted full authorisation as a bank by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

    Following a period of authorisation with restrictions, Castle Trust Capital plc (Castle Trust) has been granted full authorisation as a bank by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

    After being authorised with restrictions in March 2020, Castle Trust undertook extensive testing of its new savings system and asked its customers to vote on proposals to convert their existing investments into bank deposits. Castle Trust’s customers voted in favour with an overwhelming majority and the conversion will take place later this month.

    Martin Bischoff, Chief Executive Officer said: “Being granted a full banking licence signals the start of the next phase of Castle Trust’s growth.  Our first priority is to convert our 30,000 existing investment accounts into savings accounts, after which we look forward to launching our exciting new range of savings products in late July.

    “The full banking licence opens up many new opportunities for the business, which we expect to benefit our specialist property finance and retail finance offerings. We already have 200,000 customers and look forward to helping even more in the future. 

    “We’ll be revealing details of our enhanced specialist property lending proposition shortly, which will build upon our existing offering to meet the needs of Buy to Let landlords and High Net Worth Individuals.  Our new status enables us to work with a wider range of property brokers. 

    “The banking licence also offers great potential for growth within Omni Capital Retail Finance, which will help more retailers and small & medium sized businesses to provide their products and services to more consumers.”

    Tim Hanford, Managing Director of J.C. Flowers & Co., Castle Trust’s majority shareholder said “Castle Trust’s achievement of a full banking licence is the culmination of a great deal of work over an extended period of time. The licence is the endorsement of the quality of this business at many levels. We have a terrific board and an exceptional team of people who deliver innovative products to our customers supported by a technologically advanced infrastructure with robust processes and controls. We look forward to continuing to be part of Castle Trust’s development and success, and remain excited by the opportunities for a nimble competitor in the UK banking market.”


    Following full authorisation on Monday 15 June 2020, all existing investments were converted into savings accounts at 7am on Monday 22 June 2020. This is known as the 'Effective Time'. as required under the scheme documents, this is a notification to all scheme creditors that the Effective Time has now occurred. All customers will receive a letter by the end of June confirming their investments have been converted.

     

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  • 21/03/2020 | Group News

    Castle Trust receives banking licence and appoints new Chair

    Following its application for a banking licence at the end of 2019, Castle Trust Capital plc (Castle Trust) was advised on 20 March 2020 that its application for a banking licence has been successful and has been approved by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

    Following its application for a banking licence at the end of 2019, Castle Trust Capital plc (Castle Trust) was advised on 20 March 2020 that its application for a banking licence has been successful and has been approved by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

    Castle Trust is now authorised with restrictions as a bank and enters into a mobilisation period.  During this period it will be required to undertake a number of actions (including the ‘Friends and Family’ testing of its new savings system) which have been agreed with the PRA and the FCA and are aimed at protecting both Castle Trust and its customers. Castle Trust is well advanced with the process and is aiming to apply for the restrictions on its deposit taking to be lifted in time for it to start to take deposits from the public later this Summer. Castle Trust has also now commenced three Schemes of Arrangement pursuant to which it intends to convert its existing Fortress Bond and Housa customers into deposit holders following the lifting of its restrictions.

    Martin Bischoff, Chief Executive Officer said: “The granting of authorisation with restrictions marks an important moment in Castle Trust’s story.   

    “Our customers are at the heart of our drive to become a bank.  We already have 200,000 customers and by making the transition, we expect to be able to extend an enhanced offering to both them and future customers for whom we’ll be the bank of choice.”

    Tim Hanford, Managing Director of J.C. Flowers & Co. Europe, Castle Trust’s majority shareholder said “We have seen Castle Trust develop from its inception in 2012, building its customer base and product propositions to the point where a banking licence became the obvious next step.  The company’s strong performance and robust management have been demonstrated throughout, establishing a strong foundation for continuing its success as Castle Trust Bank.”

     

    The company also announced the appointment of Richard Pym CBE as Chair.  Richard is an experienced financial services Chair, whose most recent role was with AIB Group plc, where he chaired the company through the initial public offering in 2017 and led the board through the recovery from financial crisis.

    Richard said: “I’m delighted to join Castle Trust.  The company is growing at pace and the granting of authorisation with restrictions heralds the start of great opportunities for the business to flourish.”

    Speaking of Richard’s appointment, Martin Bischoff said: “Opportunities to recruit someone of Richard’s calibre are rare.  His extensive experience as Chair of some of our most recognised financial institutions makes him the ideal person to lead Castle Trust into the banking world and we are thrilled that he has agreed to join us.”

    Tim Hanford praised Richard’s appointment: “At J.C. Flowers & Co. we have known Richard for many years and have always admired his leadership. I am confident that Richard is an excellent complement to the Castle Trust management team and I look forward to working with Richard to deliver the business’ plan and continuing its success as a bank.”

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  • 21/03/2020 | Group News

    Castle Trust makes key new appointments

    Castle Trust has appointed two new Non-Executive Directors.

    To support the next stage of its development as it becomes a bank, Castle Trust Capital plc (Castle Trust) has appointed two new independent Non-Executive Directors, one of whom will take up the role of Audit Committee Chair.

    The new Senior Independent Director and Chair of the Audit Committee has been confirmed as Eric Anstee FCA.  Eric has extensive experience across the financial services industry and has chaired Audit Committees for the likes of OneSavings Bank plc, Sun Life Financial of Canada Limited and Paypoint plc.

    Eric said “Castle Trust’s credentials are very strong with a proven track record.  I look forward to being part of the business as it goes through such a significant period of development.”

    Richard Pym, Castle Trust’s Chair added: “Eric brings a wealth of Audit Committee experience to the role and was a natural choice.  We’re confident that the Committee is in safe hands with Eric as Chair.”

    The firm has also appointed Melba Montague as Non-Executive Director. Melba, the European Banking and Financial Markets leader at IBM Global Business Services, brings a wealth of financial technological experience to help drive Castle Trust’s change agenda.

    Speaking of her new role, Melba said: “The company has big plans and being part of the team taking Castle Trust through the launch process and into the next phase of its development is particularly exciting.”

    Richard Pym also welcomed the appointment: “As a recognised leader in the world of IT, Melba brings a unique set of skills to the Castle Trust board.  Her expertise within the technology field will support our drive to optimise our customer journeys.” 

    Martin Bischoff, Chief Executive Officer said of the appointments: “This is a pivotal moment in Castle Trust’s story and making such prestigious appointments really sets the direction of travel into the banking world. 

    “This is an exciting time for the business and with such solid support, I look forward to seeing Castle Trust become a leading force within the banking community.”

    Tim Hanford, Managing Director of J.C. Flowers & Co. Europe, Castle Trust’s majority shareholder said “We are pleased to welcome these new directors to the Castle Trust board.  With the support of such high calibre members and their respective skills and experience, we are confident that Castle Trust will continue to develop as a successful specialist bank providing an array of sophisticated financial products to its customers.”

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  • 24/02/2020 | Intermediaries News

    A changing market requires a different type of product

    The property investment market is changing, we explore how new products are needed to meet the growing demand for flexibility.

    As originally published in Bridging & Commercial.

    Increased cost and regulation have lessened the appeal of traditional BTL in favour of alternative types of investment, such as holiday lets, HMOs and refurbishment. At the same time, a flat property market and uninspiring house price inflation leave little to excite short-term speculators.

    The definitive result of the general election may prove to be a shot in the arm for the property sector, but even factoring in a Conservative majority government, Savills has forecast national house price growth over the next five years to be just over 15%.

    There remains significant opportunity for those investors who are prepared to adapt their approach to the changing market, and, at the moment, those opportunities appear to be for alternative types of property investment for landlords who are prepared to take a longer-term view.

    At Castle Trust, we have seen increasing demand from property investors for loans that can deliver the flexibility and lending appetite of traditional bridging, but with longer terms that can provide them with peace of mind. The market is shifting and, as lenders, we need to adapt to provide the products that best fit the requirements of clients.

    This is why we have launched TermTen, a 10-year term loan that is fixed for five years, after which time customers are able to refinance penalty-free. This might be an unusual concept for some brokers, but it is one borne out of customer requirement, and the longer term enables rates to be competitive. We believe that this approach will prove popular among borrowers and be adopted by more lenders that realise a moving industry requires a different type of product.

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  • 29/10/2019 | Intermediaries News

    The rise of longer-term short-term products

    We look at why short-term products are getting longer...
    As originally published in Development Finance Today.

    The average time taken to sell a home increased by nearly two weeks in 2018 compared with 2017, according to the latest City Rate of Sale Research report that has been produced by the Centre for Economics and Business Research (CEBR) and Post Office Money.

    The research found that the average time to sell a property in the UK was nearly four months (114 days), while homes in Oxford took the longest to sell, staying on the market for an average of five months (152 days). London dropped down the list having topped it the previous year, but the average time to sell still increased by a week from 131 days to 138 days.

    It’s little wonder then that demand for longer-term, short-term lending is increasing, as property investors are realising from the outset that they may need more time to secure an attractive exit.                                    

    This is why, at Castle Trust, we launched development exit products that are available on a three-year term with a two-year early repayment charge (ERC). These products provide developers with the extra time they need to properly market their scheme and achieve the best possible price, without the inconvenience and cost of having to refinance after 12 or 18 months. Developers are also able to repay the loan without penalty any time after two years if they are able to do so and the products can even include the flexibility to sell an agreed percentage of the properties during the ERC period, giving the client a product that works on their terms.

    But three years is not the limit when it comes to longer-term, short-term funding. After all, the distinguishing characteristic of most bridging products is not necessarily the term, but the flexibility they can deliver in funding an acquisition, project or investment ahead of an exit in the future.

    So, with this in mind, short-term products don’t always have to have a short term. In the right circumstances and for the right clients, there could be times when a longer term of five, or even 10 years, provides a client with the space and time they need to secure the most opportune exit. As with most decisions, timing is everything and so providing investors with more freedom about when they dispose of an asset gives them greater control over the value they can achieve.

    There are obviously considerations here about how long a client may be tied into a loan with ERCs before they can exit without cost, but in the current environment and the foreseeable future when house price activity continues to look subdued, longer-term, short-term products could become a very useful tool for brokers and their clients.

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  • 21/10/2019 | Intermediaries News

    Revamped Development Finance

    Our Development Finance proposition has been revamped. Find out more about what's changed...

    Castle Trust has revamped its Development Finance offering with the recruitment of Simon Whitfield to head up the proposition.

    Whitfield, who joins Castle Trust after holding senior roles at Wellesley Group and The Co-operative Bank, will lead the lender’s renewed focus on growing its share of the development market, increasing its lending to experienced developers who want to maximise their returns through the efficient use of capital.

    The new Development Finance proposition from Castle Trust is available to individuals, SPVs and limited companies that require up to 70% 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. Every case will be supported by a dedicated team for the full term of the loan, with Castle Trust on hand to provide expertise throughout the build.

    Barry Searle, Managing Director of Property at Castle Trust, says: “There continue to be huge opportunities for developers to meet the increasing demand for housing through the provision of 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 out team and deliver intermediaries with a proposition that we can commit to for the long term. 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.”

    Simon Whitfield, Head of Development Finance at Castle Trust, says:  “It’s fair to say that it’s a difficult environment for developers at the moment as political and economic uncertainty are impacting on both the property market and the provision of affordable, reliable finance. But at Castle Trust we have a real appetite to lend now and build long term partnerships with our intermediaries.

    “On every case we will ask three simple questions. 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? If the answer to all three of these is yes, then pick up the phone to Castle Trust. We are able to offer keen pricing and we want to have a conversation about how we could help.”

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  • 07/10/2019 | Intermediaries News

    Major enhancements to our broker portal

    On 26th September, we launched some major enhancements to our broker portal. Take a look to see what's changed...

    On 26th September, we launched some major enhancements to our broker portal, including full online case management, secure messages and automatic certification of uploaded documents.

    The new upgraded case manager area provides brokers with everything they need to manage all of the business they write with Castle Trust, with instant access to the status of their cases available 24 hours a day, seven days a week. A key feature of this area is an up-to-date listing of any outstanding information required to advance an application, so that brokers can clearly see at a glance how their case is progressing.

    Another feature of the enhanced portal is the secure messaging platform, which enables direct communications between brokers and the underwriting team. This system enables brokers to keep all of their case correspondence in one place, making it easier to manage and all messages are time and date stamped and grouped in conversations, just like on a smartphone. In addition to this, there is no longer any requirement for brokers to certify documents that are uploaded onto the portal, as these will be automatically verified using the broker’s unique login details.

    Barry Searle, Managing Director of Mortgages at Castle Trust, says:

    “These technological enhancements to our broker portal represent a huge step forward in the experience we are able to offer brokers who work with Castle Trust. We offer bespoke loans to match client requirements, and so we understood that we couldn’t settle for an out-of-the-box technology solution. Instead, we worked with a dedicated team of in-house developers to ensure that our technology takes the same tailored approach as our lending. I’m delighted with the outcome, and I’m confident that brokers will be blown away with the experience when they next work with Castle Trust.”

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  • 04/09/2019 | Group News

    Castle Trust invited to apply for a banking licence

    Castle Trust has been working closely with the Prudential Regulation Authority and the Financial Conduct Authority on our banking licence application, which we submitted in early September 2019.

    September 2019

    In April 2018 we announced our intention to become a bank. Since then, we have been working closely with both UK regulators, the Prudential Regulation Authority and the Financial Conduct Authority, on our banking licence application. We were recently invited to submit our application, which we did this week.

    This is a natural next step in Castle Trust’s journey that started when we were founded in 2012 with a simple mission: to help both investors and borrowers achieve their financial goals. Becoming a bank is an exciting milestone but it won’t change our focus on doing what’s right for our customers. In fact, it means we’ll be able to offer a broader range of products in the future.

    This stage of the rigorous application process is expected to take until spring next year. There is nothing existing customers need to do now and we’ll keep customers updated on a regular basis.

    Speaking about the application, Martin Bischoff, Chief Executive Officer said:

    “Being invited to apply for a banking licence by the UK regulators is testament to the strength of the careful planning and preparations we have put in place. Castle Trust has always been proud of being different, and now we’re in the process of becoming a different kind of bank. We’re very excited about the opportunities that come with a banking licence to better help our customers achieve their financial goals.”

    You can find more information about our banking application on our Q&A page.

    Read more
  • 16/08/2019 | Intermediaries News

    Weak pound opens door to Ex-Pat investors

    We look at how the struggling pound is creating new opportunities for Ex-Pat investors...
    As originally published in Financial Reporter.

    If you have just returned home from a holiday overseas, you will know all too well about the impact of the struggling pound. But just as a weak pound has made it more expensive for you to buy dinner or hire a car, it has made UK property far more affordable to potential buyers who are remunerated in other countries.

    Expats looking to invest in UK property can benefit from the dual advantage of a stagnant property market stifling prices, and the increased buying power of their money. Here’s a closer look at what a difference a weak pound can actually make to overseas buyers.

    Euros

    On 22 June 2016, the day before the EU referendum, £1 was worth €1.30, according to the currency exchange website xe.com. This means that a property worth £750,000 would have cost an equivalent of €975,000.

    On 1 August this year, £1 was worth €1.10, which means that a property worth £750,000 could now cost an equivalent of €850,000. That’s a saving of €125,000.

    US Dollars

    On 22 June 2016, £1 was worth $1.47, which means that a property worth £750,000 would have cost an equivalent of $1,102,500

    On 1 August this year, £1 was worth $1.21, which means that a property worth £750,000 would cost an equivalent of $907,500 – a saving of $195,000 because of the exchange rate.

    We work with a number of brokers who have seen a considerable increase in enquiries from UK nationals living abroad who want to take advantage of current exchange rates to invest in property. At a time when the domestic property market is subdued, this increased activity from expat buyers is a welcome boost to business. So, think about how you could make the most of the weak pound to open the door to more expat clients.

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  • 15/08/2019 | Intermediaries News

    Default rates should only ever be a last resort

    We take a look at how default rates should only be a last resort...
    As originally published in Bridging and Commercial.

    There’s been a lot of talk of default rates in recent months, both in the trade press and on LinkedIn. The announcement by FIBA that it would start publishing lenders’ default rates put the spotlight on facility extension charges and the ASTL quickly followed up to confirm that its code of conduct for members was amended in 2017 to ensure that all members applying an alternative higher interest rate, such as the default of a loan, must make it clear and transparent in all of their documentation.

    Transparency on default rates is clearly important, but it’s really just the bare minimum that lenders should be doing. Default rates have come to the fore recently, not just because of announcements by trade bodies, but also because, in the current market, properties are taking longer to sell, and more borrowers face the potential need to extend their finance.

    If an extension, or refinance, is required it should not come as a surprise to the borrower, the broker or the lender. Most responsible lenders should start a dialogue about potential exit solutions many months before a default rate might be triggered. At Castle Trust, we start engaging with borrowers a full 12 months ahead of the maturity of the loan, and we do not charge default rates. Instead, we will look to work with the borrower to identify whether refinancing their loan might be an appropriate option if they do not expect to exit via sale of the asset.

    Much has been spoken about default rates, but if lenders work in the best interests of their borrowers and brokers, they should only ever be a last resort when all other avenues have been exhausted.

    Brokers have a role to play too. In an environment when a higher proportion of short-term loans are likely to extend beyond their redemption dates, brokers should consider the way a lender treats its customers at the end of a loan as well as at application when they choose the most suitable lender for their clients. It’s a very competitive lender market and there are plenty of options to place a case with lenders that will not charge clients expensive default rates.

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  • 12/08/2019 | Intermediaries News

    The compelling maths of holiday lets

    With staycations on the rise, more and more landlords are realising the potential of holiday lets...
    As originally published in Specialist Financial Introducer.

    There are many consequences to the ongoing uncertainty caused by the continued Brexit situation – one of which is the rise of the staycation. The current political situation has hit the value of the pound, making it increasingly expensive for holidaymakers to go abroad, which means that more people are looking to take their holidays in the UK.

    Visit England says the number of people booking self-catering holidays in England increased from 6.22 million in 2015 to 7.23 million in 2017 – and the value of the pound has fallen significantly since then.

    This growing demand, coupled with the popularity of sites like Airbnb, has presented an emerging opportunity for property investors who are looking at alternatives to a traditional buy-to-let investment.

    A furnished holiday let is a more involved investment than a standard buy-to-let and investors should be commercially prepared for periods of no occupancy, high turnover and increased costs, all of which make holiday lets much more like a trading business.

    An advantage of this, however, is that a furnished holiday let is therefore treated like a business rather than a passive investment when it comes to taxation. For example, investors in a furnished holiday let are able to continue to claim full relief on mortgage interest payments in addition to other benefits that are not afforded to buy-to let investors. They can also claim entrepreneur’s relief when they sell a property, for example, so could pay 10% rather than Capital Gains Tax at 28%. The detail of these tax consideration can be complicated, so it’s important that your clients speak to a specialist tax adviser to get accurate information about their tax liabilities when they are considering an investment in a holiday let.

    One area that is not complicated, however, is the potential to generate higher returns. For example, according to Rightmove, it is possible to purchase a 2-bedroom flat in good condition, overlooking the beach in Margate on the Kent coast, for £185,000. Let to tenants on an AST, this type of property could generate around £600 in rental income each month, or £7,200 a year – that’s an annual yield before costs of 3.89%.

    A similar type of property could be listed on Airbnb for around £140 per night. Let’s assume that the property is fully occupied in July and August and then let to holidaymakers a further 30 weekends throughout the year – this means that it would accommodate holiday makers for 122 nights in a year. At £140 a night, the property would therefore generate £17,080 in income, which is the equivalent yield of 9.23% before costs.

    Holiday lets are not for everyone, but for the right investor, the maths can be quite compelling, particularly in the current environment that is continuing to drive an increasing number of staycation holidaymakers.

    Read more
  • 12/08/2019 | Intermediaries News

    If I were Prime Minister...

    Reflecting on the recent change of Prime Minister, our Director of Sales, Marcus Dussard discusses what he would do in the top job...
    As originally published in Bridging and Commercial magazine.

    By Marcus Dussard, Director of Sales, Castle Trust.

    Housing is a massive issue in this country and the dynamic of demand exceeding supply doesn't look like it's changing any time soon.  The reality of our property market is that not everybody will be able to - or even want to - buy their own home, and the private rental sector plays a vital role in the provision of good quality housing.  So, I'd like to see a recognition of this and a less punitive approach to taxing landlords.  

    The current tax regime was originally introduced as part of the Cameron / Osborne government, neither of whom are still MPs.  You could also argue that they have already achieved what they set out to do: first-time buyer numbers have been boosted in recent years and a lot of casual 'dinner party landlords' have stepped away from Buy to Let.  Those that remain, in general, are more professional in their approach and committed to the sector for the long term, so let's give them some encouragement to incentivise the availability of competitively priced, good quality, privately rented homes.  I would like to see a government in place that is more representative and in touch with our population.  It seems that politicians are creating policy for lives they don't understand.  There is a saying in education that is 'know me, before you can teach me' and I think we need to have people in government why truly understand the lives that most people live.
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  • 01/08/2019 | Intermediaries News

    New Case Study library launched

    Our new Case Study Library is home to all of our case studies.
    Our new Case Study Library is home to our case studies and makes interesting reading for your tricky cases.

    Unlike a traditional library, we'll even let you bring in a cuppa, so get the kettle on and settle down for a quick read through.

    We'll be adding new cases to the library regularly, so keep popping in to see the latest cases.

    Read more
  • 30/07/2019 | Intermediaries News

    Deferred interest: looks can be deceiving

    How does deferred interest compare to rolled up interest and which is best for your clients?

    There are a range of options available to help landlords invest in properties that deliver a lower yield, including deferring interest or rolling some of it up. But which technique leads to a better outcome for your clients?

    First, it is important to understand the difference between both methods:

    Deferred interest

    With a product offering deferred interest, the all-in rate may be quoted at 6.99%, which includes 2% deferred interest and a serviced rate of 4.99%. Interest on the deferred element of the loan is compounded and then added back to the loan for payment of the total balance at redemption.

    Roll-up interest

    With a roll-up interest product there are no monthly payments required as interest is rolled up to redemption and, any interest which is capitalised is not subject to a stress test. Rolling up all of the interest can reduce the maximum LTV available and so a blended approach is popular. This is where a loan is structured so that some of the interest is serviced, but the interest on the remainder of the loan is rolled up. When the two are combined, the rates can be aggregated to give one set of loan terms.

    Both deferring interest and rolling up interest can provide a solution for landlords to invest in low yielding properties, but which is the better option for your clients? The simple truth is that every case is different and depending on the circumstances one approach may deliver the right cash flow model or be more cost effective for your client.

    At first sight, a loan with deferred interest might look like the cheaper option but remember that interest on the deferred element of the loan is compounded and this can result in a higher balance to pay off at redemption than you might expect.

    So, when it comes to structuring a deal for your buy to let clients, it is worth taking the time to consider in detail the available options and stacking up the figures to see which provides the best outcome, as the deferred choice may not always be the preferred choice.

     

     

     

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  • 17/07/2019 | Intermediaries News

    Bridging Myths Dispelled

    Think you know bridging? We dispel some of the most common bridging myths...
    As originally published in Financial Reporter.

    Bridging lending grew by 15% last year alone, according to member data from Association of Short Term Lenders, and it was driven by increasing demand from borrowers for flexible short-term funding.

    How many other sectors of our market have experienced this type of growth in a relatively flat environment? And, if you don’t already advise your clients on bridging finance, what are you waiting for?

    Despite the growth in the popularity of bridging finance, some myths still prevail about the sector. So, what’s the truth behind some of the most common bridging myths?

    Myth: The main use of bridging finance is to save broken chains

    Truth: It is true that this is a use of a bridging loan. Bridging finance is a short-term mortgage secured against property or land that is used to ‘bridge’ the gap, until longer term finance can be arranged, or the underlying security is sold – and so one use is to bridge the gap between property transactions.

    But often the purpose of bridging finance is to bridge a criteria gap, providing flexible finance where longer-term lenders are unable to help because the process takes too long, or the security is unmortgageable. Three common examples include auction finance, property refurbishment and development exit loans. Another purpose is to for clients who are looking to release equity for cash flow purposes on a short-term basis, for business use for example.

    Bridging finance is available on a first or second charge basis on residential, commercial and semi-commercial property as well as land.

    Myth: A bridging loan is a last resort

    Truth: Bridging can be a useful tool when other avenues have failed, because it offers speed and flexibility, but these attributes are more commonly harnessed by savvy investors and business owners who recognise the benefits of fast access to flexible finance as a means of leveraging their capital. Bridging finance can also provide the option to roll-up some or all of the interest and this means it can be used to manage cash flow, which opens the door to a lot of other uses, including structuring loans that fit the ICR on buy to let properties.

    Myth: Bridging lending is expensive 

    Truth: Bridging is a tool that enables investors and business owners to leverage their capital and fund investments and, in doing this, it can help to create wealth. For example, a bridging loan to fund a refurbishment project may have a total cost of £50,000 for the borrower but could increase the capital value of the property by £100,000 and so the borrower benefits from a net gain. The thing to remember is that bridging is short-term funding and so can be inefficient when taken over a longer period.

    Myth: Bridging lending is complicated

    Truth: The bridging landscape may seem unfamiliar at first, but the market has evolved significantly in recent years to become more aligned with other areas of secured lending, with greater transparency and clarity. If you have any questions, about how a product works or what it can offer to your clients, speak to a lender BDM who will be able to help.

    The key for any bridging loan is to be clear about the exit strategy. This would usually be via a refinance onto a longer-term product, the sale of the property, or a possible combination of both if additional securities have been offered as part of the loan structure.



    Read more
  • 16/07/2019 | Intermediaries News

    When one lender isn't enough

    We take a look at how a strong lender relationship can save a case from failure...

    In the specialist lending world, it’s easy to see each lender as a standalone provider and finding a lender perfectly matched to your client’s circumstances can be painstaking.  But there are ways to make it easier.

    On most occasions, it’s a question of finding the right lender and from then onwards it’s a straightforward process.  However, there can be times where thinking creatively can help to provide a better option for your clients.

    We recently received an enquiry on the refinance of a complex £13m portfolio where the loan was outside of our appetite.  With most lenders, the case would have been declined instantly and the broker left to start his search again.  Our BDMs however, are used to thinking laterally with cases and helping the broker to find a solution, even if it doesn’t sit with us.  As a result, we were able to work together with the broker and another lender to structure the loan in such a way that we could provide the senior element of the funding within our appetite, and the other lender provided the remaining amount, fulfilling the borrower’s full funding requirement.

    This example really brought home how having a good relationship with a BDM (and a good BDM!) can mean the difference between helping your client and letting a case go.  BDMs see every type of case imaginable and are often able to call upon a precedent to advise on how to build a case.  Where they haven’t seen a similar case before, it’s an exciting challenge to find the right approach and achieve the ‘impossible’.

    Your BDMs are there to help you when the going gets tough as well as with the straightforward cases.  Their experience might be just what you need to help you place your next tricky case.

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  • 05/07/2019 | Intermediaries News

    New Bridging Guide launched

    Our new Bridging Guide takes a look at some traditional and up-and-coming uses of bridging across the industry, which may provide some food for thought in terms of growing your business.
    Bridging has evolved over the years, with smart lenders innovating and creating new products to better meet clients' needs.

    Our new Bridging Guide takes a look at some traditional and up-and-coming uses of bridging across the industry, which may provide some food for thought in terms of growing your business.
    Read more
  • 24/06/2019 | Intermediaries News

    Which property refurbishments do not require planning permission?

    Not all refurbishment projects require planning permission. How can your clients refurbish without taking on a huge project?
    As originally published in Mortgage Solutions.

    A growing number of investors are choosing to generate better returns by buying a run-down property and renovating it to achieve a higher re-sale price or increased rental income. Traditionally, property refurbishment falls into two main categories – light refurbishment, where no planning permission and building regulations are required, and heavy refurbishment, which requires planning permission or building regulations.

    Light refurbishment could typically include re-wiring a property, or fitting a new bathroom or kitchen, whereas heavy refurbishments are more involved and can include converting a property to residential use, creating multiple units from a single building or converting multiple units to a single building.

    Permitted development, however, provides a third option for property investors that is less involved than heavy refurbishment but provides more scope to add value than light refurbishment. As an example, at Castle Trust, we recently launched a bridging product that can be used for refurbishment where building regulations are required but planning permission is not.

    This combination provides investors with a wide scope of options, so what type of changes to a property require building regulations but not planning permission?

    Building regulations will probably apply for someone who wants to put up a new building, extend or alter an existing one, install washing and sanitary facilities, hot water cylinders, water drainage, replacement windows and fuel burning appliances of any type.

    In these circumstances, the work must meet the relevant technical requirements in the building regulations and they must not make any other part of the property less compliant or even dangerous.

    When it comes to planning permission, it is always worth checking with the local planning authority to check whether a project falls within permitted development of if planning permission is required. However, as a general rule, the following changes can be made without the need to apply for planning permission:

    Internal

    Nearly all internal works such as loft conversions, garage conversions, new staircases, bathrooms, kitchens, or rewiring, do not require planning permission. But always check if the property is listed or located in a Conservation area.

    Extensions

    Extensions are generally considered to be permitted developments, as long as:

    • The extension is no more than half the area of land around the original house
    • The extension is not forward of the principal elevation or side elevation onto a highway
    • The extension is not higher than the highest part of the roof
    • In the case of single storey extensions, it must not extend beyond the rear wall of the original house by more than three metres for an attached house or by four metres for a detached house
    • The maximum height of a single-storey rear extension is not higher than four metres
    • Extensions of more than one storey do not extend beyond the rear wall of the original house by more than three metres
    • Side extensions are single storey with maximum height of four metres and width no more than half that of the original house
    • Two-storey extensions are no closer than seven metres to rear boundary
    • The materials are similar in appearance to the existing house
    • The extension does not include verandas, balconies or raised platforms.

    Garages, sheds and other outbuildings

    Outbuildings such as sheds, garages and greenhouses are also usually considered to be permitted development, provided the building is no higher than 4 metres and outbuildings do not take up more than half of the land around the original property.

    So, before you start to search for the right refurbishment loan for your client, make sure you understand the exact nature of the work and the regulations and permissions that are required, as this will influence your choice of product.

    Read more
  • 28/05/2019 | Intermediaries News

    Is it time to buy your clients more time?

    With average time taken to sell a property increasing, more and more developers are looking for flexibility in development exit funding...
    As originally published in Financial Reporter.

    The average time taken to sell a property in the South East is approaching six months, according to RICS, which says that properties elsewhere in the country are taking up to five months – and these figures support the anecdotal evidence that the transaction market continues to be stagnant.

    This is bad news for developers with completed schemes and we’ve seen a significant increase in the demand for development exit loans to help investors bridge the gap between development finance and a longer-term exit, whether it’s refinancing or selling the asset.

    And it’s not just demand for development exit loans that has been increasing, the term of loans sought by developers is also on the rise. With the ongoing political squabbling doing little to create an environment of certainty, developers are adjusting their expectations and taking a more pragmatic approach.

    Many have accepted that they may be in this for the long haul and, rather than arranging short-term finance of 12 or 18 months only to potentially have to refinance again at the end of the term, more developers are buying extra time at the outset in the form of three year development exit loans.

    Three years is undoubtedly a long time for short-term finance and the risk associated with this more cautious approach is that a developer could find a suitable exit in less time and have to pay a fee to redeem the loan.

    This is why, at Castle Trust, our development exit products are available on a three- year term with a two-year ERC, enabling developers to repay the loan without penalty any time after two years if it suits them. The products can even include the flexibility to sell an agreed percentage of the properties during the ERC period, giving the client a product that works on their terms.

    We’re not the only lender offering more flexible development exit loans of course, and this area of the market is currently seeing a lot of innovation in response to growing demand.

    So, if your developer clients are looking to buy themselves more time, take another look at the options – they may be able to access a more flexible solution than you thought possible.

    Read more
  • 22/05/2019 | Intermediaries News

    Certainty of funds must be a key consideration

    In the current environment, certainty of funding is no longer a given, so how can you help to protect your clients?
    As originally published in Financial Reporter.

    LinkedIn is a great way of keeping up to date with what is going on at the coalface of the market as brokers will often share their frustrations online long before any trends are picked up by more formal research.

    One recent trend I’ve noticed on LinkedIn and feedback from my team of business development managers is the growing number of brokers who are frustrated by lenders pulling out of deals once they have been agreed.

    It’s a worrying development that puts brokers in a difficult position and can leave clients frustrated and out of pocket, so how can you guard against being let down by a lender?

    In the current environment, the strength and certainty of funding should be amongst the top considerations when you are choosing the right product and lender for your clients.

    Your relationship with your BDM is key. A good BDM will answer any questions that you have about the certainty of a lender’s funding and give you the confidence that you need for your client’s deal.

    Good BDMs will also keep you informed as the case is progressing. For many BDMs, their work stops at the point of submission but for a good BDM, that’s just the beginning. They’ll help to keep your case progressing and give you advance warning of any hiccups that might be on the horizon, helping you to keep your clients up to date.

    The first thing is to ask your BDM whether they rely on a funding line from a third party. Many lenders in the specialist sector rely on third party funding, and this isn’t necessarily a bad thing, but if your lender does, you may want to ask whether the funding line is soon scheduled for renewal. Also check whether the lender has more than one funding line, with different institutions and renewal dates, to ensure continuity of service. At Castle Trust, our loans are funded by Fortress Bonds, investment products available to the public. That means that we are fully in control of our funding line and aren’t beholden to a third party funder.

    Another consideration is the commitment of the lender and its backers to the market. A number of new entrants have stepped forward in recent years, which is great for competition, but not every lender will have the same level of commitment from their shareholder and, if the going gets tough, there is a chance that some might take a step back.

    Also consider the lender’s experience of lending throughout different economic cycles. This applies to both the company and the individuals within the organisation. Lending in a stable environment is easy. The art is in continuing to provide consistent lending decisions when the landscape becomes more challenging. Our team have weathered the storms of many economic cycles and are well equipped to provide consistency regardless of the current environment.

    Certainty of funding is a key consideration in the current market and it’s a growing concern amongst brokers. Make sure that you ask your BDM the right questions, so that you can proceed with confidence.

    Read more
  • 21/05/2019 | Intermediaries News

    Three questions to ask your lender before placing a large loan

    What qualities should you look for in a lender to protect your clients' large loans?
    As originally published in Bridging and Commercial.

    Large loans can be extremely lucrative for brokers. On a loan of £5 million, for example, a proc fee of 1.5% would deliver an income of £75,000 for just one case.

    But while they present significant opportunity, they also pose a greater risk of falling through than more standard transactions. Some lenders can be more conservative when it comes to the concentrated risk of a large loan and, by nature, these types of enquiries are often quite complex.

    So, if you have a client who wants to borrow a large loan, you need to make sure you are doing all you can to facilitate a successful completion. Letting a large loan slip through your fingertips because you chose the wrong lender can prove costly for your client and very frustrating for you.

    With this in mind, what qualities should you look for in a lender? Here are three questions you should be asking your lender before attempting to place any large loan:

    1. What is your decision-making process for large loans?

    The problem many lenders have with large loans is that they have a hierarchical decision-making process. So, while they may be confident about a case at DIP when it is agreed with a junior mandate holder, the progression of the case through the hierarchy can be fraught with indecision.

    Often, it can be the case that the questions asked throughout this process do not enhance the credit decision but are necessary for the higher mandate holder to justify their position, and it all takes time.

    There are many lenders that claim to be able to underwrite large complex cases in a timely manner, but still have to put large loans through this cumbersome, multi-stage process.

    So, look for a lender that doesn’t just claim to be able to specialise in large loans, but is able to prove its commitment with a dedicated process for making large loan decisions. A hierarchical approach is rarely fit for purpose in this market, so opt for a lender with a flat decision-making structure and a daily focus on progressing complex cases.

    2. Do you have experience of successful large loan completions?

    Ask to see the lender’s credentials. How many large loans have they completed and how long did they take? More importantly perhaps, try to find out how many large loans they have declined once the application process has started.

    At Castle Trust, we recently completed a £12m loan in just 11 working days and were handed a tight deadline because the client had been let down by another lender and was left incurring penalties on an overdue development loan. Because of the situation, the valuation and some of the legal work had already been carried out, but it was a very complex loan, secured across multiple properties and the size of the deal required sign off at board level. But our efficient large loans process ensured we were able to secure a near-immediate decision and complete on the deal in just two weeks.

    3. How do you secure your funding?

    Certainty of funding is always a key consideration, but it is particularly important on large loans, where lenders with fragile funding lines can be easily spooked. So, ask about a lender’s funding, whether they lend their own funds or rely on funding lines from external institutions and, if so, how many funding lines do they have and when are they up for renewal?

    If your lender lets you down because it is unable to fund a deal, your relationship with your client is likely to be damaged, so do your homework and make sure you can be confident that your client’s application is in safe hands.

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  • 15/04/2019 | Intermediaries News

    New Bridging Loans

    Castle Trust has launched a new Bridging Loan with streamlined requirements for brokers who want a combination of transparent pricing, fast-track service and flexible underwriting.

    Castle Trust has launched a new Bridging Loan with streamlined requirements for brokers who want a combination of transparent pricing, fast-track service and flexible underwriting.

    Available for a flat rate of 0.67%pm, Castle Trust’s new Bridging Loan can be used for first charge Buy to Let cases up to £1 million. The product has a choice of a nine or twelve month term, with an ERC period of three months.

    The loan can be used for all types of refurbishment that do not require planning permission, including refurbishments that do include building regulations.

    Brokers will benefit from a streamlined application process, with online submissions and quick illustrations from a dedicated team of bridging specialists who are focused on progressing cases through to completion as fast as possible.

    Marcus Dussard, Director of Sales for Mortgages at Castle Trust, said: “At Castle Trust, we’ve developed a reputation for providing brokers with creative solutions for complex cases but, as the demand for short-term finance has grown, we’ve recognised that an increasing number of brokers are looking for more straightforward bridging loans for their clients, particularly on refurbishment projects, which are becoming more popular. So, we have developed a new product and service proposition that gives them just that – a quick, uncomplicated loan with simple pricing, supported by expert underwriters who understand the market. Our new Bridging Loan combines the insight and experience we have developed over the years with a new, more accessible format. It’s a combination we think will prove very popular for brokers and their clients.”

     

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  • 15/04/2019 | Intermediaries News

    Three questions you should ask every non-bank lender

    Here are three questions you should be asking every non-bank lender before you submit an application on behalf of your client...
    As originally published in Bridging and Commercial.

    The first quarter of 2019 has already delivered a year’s worth of drama and uncertainty as the political landscape has continued to deliver, usually unwelcome, surprises and a growing number of lenders have stepped away from the market.
     

    This presents a challenge for brokers. Not only do you have to help your clients to navigate the changing environment and make the right decisions for their circumstances, but you also need to choose lenders that you can be sure will remain committed to the market throughout the uncertainty and be able to fulfil on their agreements.

    For those lenders in this market that are not banks, the strength of funding lines is critical and could make the difference between a straightforward completion and a very disappointed client. 

    So, once you find a lender that can deliver the solution your client wants, how can you have confidence the deal will complete, even if the economic conditions take a turn for the worse?

    Here are three questions you should be asking every non-bank lender before you submit an application on behalf of your client:
     

    1. Do you rely on a funding line from a third party?

      Many lenders in this sector rely on third-party funding, and this isn’t necessarily a bad thing, but if your lender does, you may want to ask whether the funding line is soon scheduled for renewal. Also, check whether the lender has more than one funding line, with different institutions and renewal dates, to ensure continuity of service. At Castle Trust, we fund our own loans with fortress bonds, which are investment products backed by the Financial Services Compensation Scheme.
       
    2. Do you have committed backers?

      At Castle Trust, we share the same commitment to the market as our shareholder JC Flowers & Co, giving us a unique confidence in its continued support. Knowing that a lender has support from an established shareholder, which is not liable to retreat from the market or withdraw its support, is reassuring for both the broker and the client, so it’s important to check who is behind your chosen lenders.
       
    3. Do you have experience of lending throughout different economic cycles?

      This applies to both institutional experience and the experience of individuals within the organisation. Lending in a stable environment is easy. The art is in continuing to provide consistent lending decisions when the landscape becomes more challenging and previous experience can be helpful.


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  • 19/03/2019 | Group News

    New Managing Director for Omni Capital Retail Finance

    On 18th March 2019, Castle Trust announced a new appointment within Omni Capital Retail Finance.

    Castle Trust Capital plc is pleased to announce the appointment of Ronnie Denholm as Managing Director of Omni Capital Retail Finance, its point of sale finance division.

    Following the acquisition of Omni Capital Retail Finance in 2016, Castle Trust has restructured the operations of the business and has ambitious plans for progress.

    Ronnie is an experienced financial services leader and joins the business from Barclays Bank Plc, where he held various Managing Director roles across the business, including most recently Barclays Partner Finance, one of the UK’s largest point of sale finance companies.  Prior to joining Barclays, Ronnie held several senior leadership roles across the American Express group, with a strong growth record across each of the business areas he led.

    Martin Bischoff, Chief Executive Officer of the Castle Trust Group said: “Opportunities to work with someone of Ronnie’s calibre are rare, so we are privileged to have him on board.  As he’s demonstrated in the past, he is a very capable pair of hands to lead the business as it looks to grow.   We have big ambitions for Omni Capital Retail Finance, which Ronnie is integral to helping us achieve.”

    Speaking of his appointment, Ronnie said: “I am delighted to join Omni Capital Retail Finance.  The company has undergone a lot of changes recently and the prospect of leading the next phase of the company’s growth is an exciting challenge.  I look forward to working together with the team to consolidate the business’ position within the market and expand its operations further. “

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  • 05/03/2019 | Intermediaries News

    Tackling ICR with rolled up or blended interest

    Rolled up or blended interest provides options for low yielding properties...
    As originally published in Mortgage Solutions.

    Not all landlords are obsessed by yield. If they were, there would be very few private rental properties available in London and an oversupply of HMOs in student towns around the country. For some landlords, purchasing a desirable asset in a sought-after location is a more important factor of their investment than achieving a high yield.

    For example, according to Which?, the NG1 postcode in Nottingham provides the best buy to let yields in the country, with an average yield of 11.99% and an average house price of £152,631. In Hampstead on the other hand, where the average house price is more than £1.6m, the average yield is just 4.20%. But this is still a popular area for investors because the location will always attract a good level of demand.

    The trouble with investing in properties that deliver a low yield is that it can be difficult to make the interest coverage ratio (ICR) stack up on a standard buy to let mortgage.

    One option to tackle ICR on low yielding properties is to roll up some or all of the interest. With a roll-up mortgage there are no monthly payments required as interest is rolled up to redemption and, any interest which is capitalised is not subject to a stress test, and so this can increase the client's borrowing capacity.

    Rolling up all of the interest on a loan can ultimately reduce the amount an investor is able to borrow however, as the payment of rolled up interest will need to be factored into the maximum LTV.

    So, for landlords with low rental yields, a blended product can be the ideal solution. This is effectively a loan that is structured so that some of the interest is serviced, but the interest on the remainder of the loan is rolled up. Because there are no monthly payments due on the rolled-up part of the loan, this element is not subject to a stress test. So, with a balance of serviced interest and rolled-up interest, it is possible to build a loan that fits the required stress test.

    The roll-up element offers the opportunity for a client to maximise their loan amount and the serviced element offers a lower rate than the roll-up element. When the two are combined, the rates can be aggregated to give one set of loan terms, keeping things simple for you and your client.

    So, if you have clients who choose to invest for long-term stability rather than yield, and need a flexible solution to tackle ICR, consider whether it would be appropriate for them to roll up some or all of the interest on the loan to achieve their lending objective.

     

     


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  • 27/02/2019 | Intermediaries News

    Breathing space for developers in a stagnant market

    Find out how development exit loans provide options for developers in the current market...

    As originally published in Financial Reporter.

    The ongoing uncertainty around the UK’s departure from the European Union is continuing to have a dampening effect on the property market, which is bad news for developers who might be struggling to sell properties or suffering from down valuations.

    The headline of the RICS December market survey was “housing market on hold for now” and the report said that the sales outlook for the next three months is the gloomiest it has been for 20 years.

    RICS said that activity indicators from surveyors continued to slip in December with sales volumes dwindling and a net balance of -28% representing the poorest reading since the series was formed in 1999. However, the 12-month outlook is a little more upbeat, which suggests that some of the near-term pessimism is directly linked to Brexit and, while there is no guarantee of greater clarity any time soon, there are indications that the property market could experience an uplift, when we enter a more stable political environment.

    So what options do developers have in the short-term if they have deadlines to pay off development finance but are also struggling to shift units at a desirable price?

    In this situation, a development exit loan could provide the breathing space they need to transition from a development at their own pace. It’s important to allow a reasonable timeframe to market and sell the properties and, at Castle Trust, our development exit products are available on a three-year term with a two-year ERC. There is also the flexibility to sell an agreed percentage of the properties during this ERC period without penalty, giving the client a product that works on their terms.

    So, don’t let your developer clients be suffocated by a stagnant property market. Consider their options with a development exit loan that can provide them with the flexibility and breathing space they need to successfully exit their current development and move onto their next project.

     

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  • 12/02/2019 | Intermediaries News

    Opportunity knocks for student lets

    Now is the time to look at student let opportunities...

    As originally published in Mortgage Solutions.

    More than 400,000 first year students will begin university in September and 80% of those students will start looking for their accommodation by March, according to research by the consumer watchdog, Which?.

    So, if your clients want to invest in student accommodation, now is the time they should be looking for the right property to ensure they are not too late to meet the demand from September’s starters.

    University hotspots are lucrative for landlords, with locations in areas with a high student population like Nottingham, Liverpool, Manchester, Leeds and the North East boasting some of the UK’s highest rental yields, according to Totally Money, which puts Nottingham at the top of the list with average yields of 11.99%.

    High yield doesn’t have to mean low quality and the standard of student accommodation has been shifting steadily upmarket, according to research by student housing charity Unipol and the National Union of Students. The survey found that average price of student accommodation in the UK has jumped by nearly a third in the last six years, with the average rental bill now taking up 73% of the maximum student loan, compared to 58% in 2012.

    This is partly caused by an increase at the top end of the market, with studio flats now accounting for 9% of student accommodation, up from just 4% six years ago. In fact, self-catered en-suite accommodation now accounts for the lion's share of student accommodation with 58% of total rooms and only 17% of students live in traditional HMOs with shared bathrooms and kitchens.

    The report says that private sector investment now provides half of all student bed spaces, up from 39% in 2012, as a growing number of landlords have identified the opportunity in the sector. Lenders have responded to meet this demand and there is now a range of flexible options to fund investment in a variety of student accommodation, from traditional HMOs to purpose built blocks.

    September may seem a long way in the future, but opportunity knocks now for investors in student accommodation.

     

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  • 08/01/2019 | Intermediaries News

    Buy to Let outlook for 2019

    How will 2019 look for the Buy to Let sector?

    As originally published in Bridging and Commercial

    If there is any sector of the lending market that is used to adapting to change, it’s buy to let. As we step into the political uncertainty of 2019 it’s worth looking back over the significant changes the buy to let market has already negotiated in recent years, to give a clue to the trends we might expect over the next 12 months.

    Over the last four years buy to let has experienced an unprecedented level of regulation and tax intervention. In 2015 it was announced that the Income Tax relief landlords are able to claim on residential property finance costs would be replaced by a basic rate relief tax reduction, with a phased introduction starting in 2017. Then in April 2016, HMRC added to the tax burden with the introduction of a 3% Stamp Duty Land Tax (SDLT) surcharge for purchases of rental property and second homes.

    In January 2017 extra regulation was layered upon these tax changes, with the PRA introducing new underwriting standards for buy to let mortgage contracts, including stricter rules on the affordability tests to be used as part of the assessment of a buy to let mortgage application. This was followed later in the year by the second part of the PRA’s new underwriting standards with the launch of additional checks for portfolio landlords, owning four or mortgage mortgaged buy to let properties.

    More recently we have seen new minimum energy efficiency standards for privately rented property, the extension of mandatory licensing for HMOs and the introduction of a minimum bedroom size for HMOs.

    It’s been a significant amount to deal with over a short period but, despite some negative speculation, buy to let has survived. Some landlords have decided to step away from the market and we have seen changes to the dynamics of the sector, but the majority of investors remain committed, demand for rental property remains strong and so does buy to let.

    Recent figures from UK Finance show that buy to let lending in the 12 months up to October 2018 was £35.4bn, which was actually £0.4bn more than the previous 12 months.

    Remortgage activity has dominated this lending and there has been a growing proportion of limited company buy to let as landlords have looked for a tax efficient vehicle for their investment. We’ve also seen increasing demand for less standard types of property investment that can deliver higher yields, such as HMOs, holiday lets, multi-unit blocks and refurbishment projects.

    So, what can we expect over the next 12 months?

    For the first time in a number of years buy to let landlords can look forward to a period without intervention and so amongst the political instability, there is at least a clear outlook for property investors. The market has demonstrated its resilience and landlords have developed an appetite to take a more creative approach to their investment. 

    Even if the macro-economic environment dampens the property market, demand for rental property will remain strong and this combined with a proven resilience and more committed and creative investors, should help to make it an exciting 12 months for buy to let.

     

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  • 04/01/2019 | Intermediaries News

    A blended alternative to top slicing

    We look at blended products as an alternative to top slicing...

    As originally published in Financial Reporter.

    Top slicing has become a popular way for affluent buy to let landlords to invest in property where the yield does not support the rental coverage. But it’s not the only way for sophisticated investors to purchase high value buy to let property.

    Blended rates offer an alternative to top slicing, allowing investors the flexibility to service a portion of their loan, whilst rolling up the interest on the rest, enabling you to structure a solution that fits the required rental coverage. Here's an example of how it works.

    We recently worked with a broker to help a landlord client with a portfolio of three properties valued at £1,050,000.  The client wanted to consolidate his existing borrowing into one loan, with a view to selling his portfolio in three years.  He also wanted to ensure that the monthly repayments would be no more than £3,500 per month.

    The problem was that the rental income alone would not support the full servicing of the loan, so the client was struggling to achieve his required loan amount without having to subsidise it from his personal income.

    To provide a solution, we created a blended rate product for the client, with part of the interest serviced and the remainder of the loan on rolled-up interest.

    £597,127 was offered on a serviced basis with an interest rate of 6.99%.  The remaining £135,180 required was offered on a rolled-up basis at 8.59%.  The two rates were combined to give an overall blended interest rate of 7.29%.

    The result was that the client was able to achieve his desired loan amount and continue with his plan to sell the portfolio in the next three years, using the proceeds of sale to fund the rolled-up interest without having to use his personal income.

    So, if you have affluent clients who want to invest in high value, low yielding buy to let property, consider a blended alternative to traditional top-slicing.

     

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  • 13/12/2018 | Intermediaries News

    More older renters provide opportunities for landlords and brokers

    Find out how older renters could provide new Buy to Let opportunities...

    As originally published in Mortgage Solutions.

    What age group do you think about when you consider Generation Rent?

    Perhaps surprisingly, one of the fastest growing areas of tenant demand is amongst people over the age of 60. According to a report by the Centre for Ageing Better (CfAB), the number of over-60s renting privately has increased by 200,000 in the last four years. And the CfAB predicts that about a third of people over 60 could enter the private rental sector by 2040 as a growing number of older homeowners choose to sell up and rent in retirement.

    This trend could have a significant impact on the target tenants for your landlord clients and it could present an opportunity for you. The primary factor impacting the success of a buy-to-let investment is the right property pitched to the right tenants in the right area. A shift in the demographic make-up of the tenant population could drive growth in new areas and on new types of property that have previously proven unpopular amongst buy-to-let investors.

    A landlord targeting older tenants may, for example, may consider purchasing a bungalow in a rural location, which would otherwise prove an unlikely choice of investment if they were targeting young professionals.

    Another element to consider is the styling and finish of the property. Older tenants may choose to sell their home to downsize but having established a level of wealth and comfort throughout their working life, they won’t want to sacrifice the quality of their accommodation. Renovating run-down properties could provide landlords with an opportunity to deliver the high standards their potential tenants are expecting and could provide you with an opportunity to finance those renovations.

    The most straight-forward approach to property refurbishment is light refurbishment, which doesn’t require planning permission or building regulations and so avoids some of the risks of more speculative property development. Light refurbishment renovations commonly include new bathroom, new kitchen, redecoration, rewiring, or new windows and a newly renovated property can increase the capital and rental value.

    A refurbished property could help landlords to attract this new generation of tenants, and a fresh look at the idea of Generation Rent could help you to boost your buy-to-let business.

     

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  • 11/12/2018 | Intermediaries News

    The growing opportunity in multi-unit lets

    We take a look at how multi-unit lets might create an opportunity for your landlord clients...

    As originally published in Bridging and Commercial.

    The recent legislation changes for HMOs have triggered a wave of coverage about the higher yields that can be earned with a multiple occupancy property investment over standard buy to let. But HMOs aren’t the only choice for this type of investment and a multi-unit freehold block is another option that can deliver similar returns.

    A multi-unit block differs from an HMO in that it contains separate, independent residential units, each with their own AST agreement. Each household will have its own entrance and private areas into which no one else has right of access, and there are also likely to be common parts, such as a hallway or garden, that all households have the right to use. Examples of multi-unit blocks include:

    • Purpose built blocks of flats
    • Houses converted into flats
    • A number of houses all held under one freehold title

    Multiple-unit flats are lucrative for investors because they provide economies of scale and so, by their nature, they tend to be larger deals. They also provide opportunity for investors to realise greater capital gains as they can increase the value of each unit by separating the title and selling them off individually.

    According to the Mortgages for Business Buy to Let Mortgage Index, multi-unit blocks delivered the biggest uplift in yield this quarter compared to any other category of investment.

    The average yield achieved by a multi-unit block in Q3 of this year was 8.4%, compared to 7.5% in Q2. The yields achieved by HMOs remained consistent at 8.6% in Q2 and Q3. The yield on a vanilla buy to let during this period was just 5.4%.

    We recently worked with a broker to help a 61-year old self-employed director who had successfully developed two adjacent four-bedroom detached houses on a plot of land in Oxfordshire.  Both properties were listed on the same title and both were tenanted.  The total value of the houses was £1.73 million.

    The client wanted to raise £1.07 million to clear the development loan, pay off existing debts and fund a new project.  We structured a solution to meet the client's requirements, with a product that allowed him to roll up some of the interest and service the remainder.

    Many lenders are able to lend on multiple units on a single title but there are often more restrictions imposed when this is the case. For example, some lenders will not lend on new build properties and some may apply a stricter rental calculation. There are also often limits on the number of units held on the single title. So, look for a lender that takes a flexible and commercial approach, reviewing each application on its own merits and delivering bespoke solutions to meet the needs of the individual customer.

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  • 07/12/2018 | Intermediaries News

    Refurbishment finance for first time investors

    We take a look at how light refurbishment could be an attractive option for first time investors...

    As originally published in Financial Reporter.

    Your Buy to Let clients will soon start to feel the financial impact of recent tax changes, as they submit their tax returns for 2017-2018 and this could trigger a conversation about how they can maximise the returns on their investment to counter the extra cost.

    One way many landlords choose to increase their returns is buying a run-down property and renovating it to achieve a higher re-sale price or retaining the property and benefitting from increased rental income.

    For first time investors in property refurbishment, the most straight forward approach is light refurbishment that doesn’t require planning permission or building regulations and so avoids some of the risks of more speculative property development. Light refurbishment renovations commonly include new bathroom, new kitchen, redecoration, rewiring, or new windows and a newly renovated property can increase the capital and rental value. A refurbished property can also help landlords to attract higher quality tenants and reduce long-term maintenance costs.

    Often, the properties that provide the best opportunity for refurbishment, even light refurbishment, are in a condition that makes them effectively unmortgageable, and there is a growing number of lenders that offer flexible short-term lending options to fund property renovation.

    A common concern amongst landlords investing in property refurbishment is whether they will be able to refinance to a longer-term solution at the end of their refurb loan. But some lenders are able to offer both the short-term finance and a longer-term solution once the renovations have been completed.

    This can provide your clients with the peace of mind in knowing that they have fully prepared their finance at the outset, which can benefit experienced refurb landlords as well as first-time investors.

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  • 04/12/2018 | Intermediaries News

    Investing in student property occupied by a family member

    We look at options for parents looking to buy student properties...

    As originally published in Mortgage Solutions

    The number of students studying at UK higher education institutions is now more than 2.3 million and this presents a significant opportunity for landlords who want to invest in HMO property.

    There are a number of benefits to investing in student lets. For the right properties in the right area, there is almost guaranteed demand year after year and student lets are often arranged early – up to six months in advance – which can minimise the risk of void periods.

    The average yields on HMOs are also currently higher than any other property investment. According to the Mortgages for Business Buy to Let Mortgage Index, in Q2 of this year, HMOs delivered an average yield of 8.6%, compared to a yield of just 5.5% on standard Buy to Let property, while multi-unit freehold blocks delivered an average yield of 7.5% and the average yield on semi-commercial property investments was 7.8%.

    For these reasons, we often work with brokers whose clients have children who are going to university and want to invest in an HMO that can be used by their children and rented to other students to cover the costs.

    This is a very practical idea, but it does carry some complications. Letting a property to a relative is considered as regulated Buy to Let and this can restrict the number of options. However, most lender definitions state that Buy to Let mortgages are considered to be regulated if at least 40% of the property is used by a family member. So, if your client were to buy an HMO in which their child was to occupy one bedroom out of, say, five on a separate tenancy agreement to the other occupants, then it would not qualify as a regulated Buy to Let contract and you would have more options.

    In these circumstances, you should ensure that the rental income achieved by letting rooms to non-family members is sufficient to cover the stress test as this will provide the lender with comfort that the investment is sustainable. However, in most cases, this is unlikely to prove a problem as the yield achieved on HMOs means that there should usually be excess rental income to cover the stress test.

    If you are working with clients who would like to invest in student property that will be occupied by a family member, speak to a lender that specialises in HMO investments and can help you to structure the right deal to best meet their requirements.

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  • 23/10/2018 | Intermediaries News

    A flexible solution to bridge the uncertainty

    We discuss the slowing in the mortgage market...
    As originally published in Bridging and Commercial

    In case you hadn’t heard, the UK is scheduled to leave the European Union next March. 

    The uncertainty surrounding the outcome of Brexit negotiations has, temporarily at least, put the brakes on an already faltering property market and transaction activity is suffering.

    The September 2018 RICS UK Residential Market Survey has shown a continued weakening in national new buyer demand, citing a mixture of affordability constraints, a lack of stock, economic uncertainty and interest rate rises.

    RICS says that new buyer demand was down by 11% in September on the same month last year and, at the same time, new sales instructions have also deteriorated, leaving average stock levels on estate agents’ books close to record low levels.

    The combined effect of constraint on both supply and demand has resulted in house price resilience, but with little fluidity in the market, properties are taking longer to sell. According to RICS, the time taken to complete a sale, from initial listing, has increased to approximately 19 weeks, which represents the longest duration since the measure was introduced at the beginning of last year.

    For home-movers, this period can be frustrating, but for developers it can also prove very costly and any delay in selling the property and redeeming the development loan can significantly impact the profit they achieve on a scheme.

    This provides an opportunity for you, as a stagnant property market leads to increased demand for development exit loans, that can benefit developers in a number of ways.

    A development exit loan allows a developer to refinance their completed development at a lower rate than most development finance, while giving them more time to achieve the best sales price and even release equity from the scheme to use towards future projects.

    When it comes to development exit loans, flexibility is key, particularly if your client is actively marketing their development for sale. A loan with a lower rate may ultimately prove more expensive for your client if it also comes with restrictive early repayment charges.

    A stagnant property market doesn’t have to put the brakes on your business and there are always options to deliver your clients appropriate solutions, whatever the stage of the economic cycle. In the current environment, development exit loans provide a great opportunity for you to provide your clients with the flexibility they need to bridge the current uncertainty and continue to grow their portfolio.

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  • 18/09/2018 | Intermediaries News

    New Telephone BDM

    We have appointed Steve Gregory as our new Telephone Business Development Manager for the Midlands.
    26th July 2018

    Castle Trust has appointed Steve Gregory to become its new Telephone Business Development Manager for the Midlands.

    Steve, who was previously a Business Development Executive at Castle Trust, will work with brokers across the region to help identify appropriate solutions for their High Net Worth clients, buy to let investors and entrepreneurs in need of business funding.

    In addition to this appointment, Castle Trust is further strengthening its sales team with the recruitment of new Business Development Executives.

    Marcus Dussard, Sales Director at Castle Trust, said: “Steve has worked at Castle Trust for two years now and developed a strong reputation amongst brokers as someone they can call if they are struggling with a complex case. He has a great understanding of our proposition and the challenges faced by brokers, and this makes him a huge asset to have on the team. In addition to the appointment of Steve, we are further strengthening our support for brokers and recruiting for new Business Development Executives.”

    Steve Gregory, Telephone BDM for the Midlands, at Castle Trust, said: “Castle Trust has a unique offering for brokers in that we can genuinely structure bespoke loans to help their clients fund a property investment or business venture. I am looking forward to the opportunity to work more closely with our intermediaries in the Midlands to help identify the best solutions for their clients.”

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  • 18/09/2018 | Intermediaries News

    Take a long-term view on short-term lets

    Last year, there were 179,034 London properties listed for rental on Airbnb...
    As originally published in Bridging and Commercial

    Last year, there were 179,034 London properties listed for rental on Airbnb.
     

    This was a 54% increase on 2016 and, so far, this year the number of listed properties has already exceeded 197,000, according to Airdna, a useful website that drills into the data of every Airbnb listing in the world. 

    Airbnb is just one marketing platform, but it’s clear that an increasing number of investors are turning to shorter lets as a way of generating better returns.

    For example, a new two-bedroom flat in Canada Water, south London, would typically be available to rent for around £1,800 a month on an assured shorthold tenancy (AST) which means that, at full occupancy, it could generate £21,600 in revenue over the course of a year. 

    A similar property in the same area could achieve around £150 a night by being let on a short-term basis. Assuming a 70% occupancy rate – which is the London average according to Airdna – that property could generate £38,325 over the course of the year, which is a 77% increase on the amount it could achieve on a standard AST. 

    It is important to note that this figure is before expenses and that the costs of running a short-term let are considerably higher than a standard buy-to-let given that the high turnover of occupants means larger cleaning, maintenance and marketing fees. But, even accounting for these, the comparable returns on a short-term let are still impressive. 

    With so many investors drawn to these returns, you need to ensure that your clients have the appropriate product for the way they intend to let the property, as short-term lets and standard buy-to-let are two distinct categories.

    The PRA’s supervisory statement on underwriting standards in buy-to-let states that an agreement to dwell in a property for less than one month is not occupation on the basis of a rental agreement, which means that mortgages for short-term lets are not restricted by the same rules that govern buy-to-let.

    Short-term lets also have different tax considerations to buy-to-let as they are treated as a trading business, although stamp duty land tax on both still carries a 3% surcharge.

    And, perhaps most importantly, a standard buy-to-let mortgage will generally require that the property is let on an AST, which effectively excludes it from being used for short-term rentals through Airbnb or similar platforms. Borrowers with a standard buy-to-let mortgage who choose to rent their property on short-term lets could, therefore, be in breach of the conditions of their mortgage and, as such, committing fraud. 

    Needless to say, this is not a position that you want to be in with one of your clients so, with the growing popularity of short-term lets, it is worth taking the time to understand how they intend to rent the property and making sure you recommend a suitable product. Taking a long-term view to short-term lets will protect both you and your client.

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  • 18/09/2018 | Intermediaries News

    Top slicing is not the only way to tackle low yields

    A lot of commentary about the buy-to-let market focuses on yield – the annual return an investor can expect to earn based on the value of the asset...
    As originally published in Bridging and Commercial

    A lot of commentary about the buy-to-let market focuses on yield – the annual return an investor can expect to earn based on the value of the asset.
     

    This is why areas with cheaper house prices – particularly university towns – are heralded as the next buy-to-let hotspots. 

    But landlords don’t always focus on yield. Often an investor will want a reliable property in an area with strong and sustained demand that can provide dependable long-term growth. These properties tend to be found in more expensive areas so rarely deliver particularly attractive yields.

    According to the latest buy-to-let yield map by Totally Money, Liverpool boasts the highest buy-to-let yield of 11.79%, while there are parts of London that only achieve a yield of 1.5%. Despite this huge gap in the yield that could be achieved, there are still many investors who would rather buy in those areas of London. In fact, in monetary terms, a 1.5% yield in London could still deliver more profit than a 12% yield in Liverpool.

    We know there is significant demand from landlords for solutions that help them to buy low-yielding properties because of the number of lenders that have started to offer top slicing, where they use the landlord’s income to supplement the interest coverage ratio (ICR). A lot of big names have recently entered this previously niche market and it goes to show that standard ICRs are not sufficient for the requirements of many landlords.

    Top slicing is one way for landlords to purchase low-yielding properties within mandatory minimum stress tests, but it is not the only option. 

    Another approach is to structure a loan where some of the interest is serviced, but the interest on the remainder of the loan is rolled up. Because there are no monthly payments due on the rolled-up part of the loan, this element is not subject to a stress test. So, with a balance of serviced interest and rolled-up interest, it is possible to build a loan that fits the required stress test. This is something we are able to do at Castle Trust, and here’s an example of how it works.

    We worked with a broker to help their client – a portfolio landlord – to buy a desirable three-bedroom maisonette in Fulham for £1,050,000. The client wanted to borrow £755,000, but the rental value was only £2,625 per month and the yield did not support this loan amount. Based on PRA stress testing, the client would only have been able to borrow £395,000 from a traditional lender, or £458,000 if the property was purchased by a limited company. This would mean the landlord would have to evidence up to £2,400 additional monthly income.

    As the client was an experienced landlord, we were able to structure a solution by splitting the balance and enabling the client to service interest of £365,000 and roll up the interest on £390,000. This meant the client was able to invest in a sought-after property with robust potential for capital gains even though it delivered a low rental yield.

    Top slicing may be flavour of the month with many lenders, but it is not the only way to meet demand from landlords for low-yielding property. With the right lender, you can structure a deal for your client that blends serviced and rolled-up interest to enable them to invest in the property of their choice.

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  • 18/09/2018 | Intermediaries News

    Quality over quantity signals a bright future for BTL brokers

    Here’s something that people don’t talk about any more: GDPR...
    As originally published in Bridging and Commercial

    Here’s something that people don’t talk about any more: GDPR.

    There was a time – just a couple of months ago – when you couldn’t open a newspaper or read a website without being bombarded with scare stories about the impact and fallout of the new data regulation. But now that implementation has been and gone, little seems to have changed, except I receive fewer emails than I used to and we have a slightly smaller marketing database at Castle Trust.

    It’s a smaller database, but it’s also a stronger database. We may have lost a number of contacts, but they were the brokers who never really engaged with our marketing messages and were even less likely to engage with our business. Now, following consolidation, we can be sure that even though we are communicating with a smaller group, they are more engaged and we can concentrate more of our energy on working with these more productive brokers. 

    There seems to be a lot of similarities here with the buy-to-let market. The dual impact of tax changes and regulation have triggered many scare stories about an exodus of landlords from the market and research from the National Landlords Association (NLA) states that up to 380,000 landlords – nearly a fifth of the market – expect to offload properties in the next year.

    But, at the moment, this anticipated exodus of landlords isn’t being translated into business volumes. According to UK Finance, there were more buy-to-let mortgages completed – and for greater value – in May this year than the same month a year ago. Conversations with some of our distributors that focus on specialist buy-to-let also indicate that they have never been busier and it seems that more landlords are taking a holistic view of their portfolios and diversifying into properties such as HMOs, multi-unit blocks and holiday lets for the first time.

    So, while changes to buy-to-let may lead to some consolidation in the overall number of landlords, those that remain have the appetite to become more engaged with the market and drive more value from their investment. Like GDPR, the focus is on quality over quantity and this is good news for brokers who can add real value by advising committed landlords on a whole set of new strategies to help them to grow and diversify their portfolios.

    It can be easy to take comfort in a large portfolio of buy-to-let clients and any reduction to these numbers can be daunting, but consolidation provides you with an opportunity to get closer to those clients that really matter and make sure that you are an integral part of their future plans.

    Read more
  • 18/09/2018 | Intermediaries News

    1.6 million opportunities for more imaginative solutions

    It’s nearly a year since the PRA introduced its requirements for the specialist underwriting of portfolio landlords and, while the past 11 months have brought inconvenience for brokers who have had to change the way they work, they have also delivered opportunity...
    As originally published in Bridging and Commercial

    It’s nearly a year since the PRA introduced its requirements for the specialist underwriting of portfolio landlords and, while the past 11 months have brought inconvenience for brokers who have had to change the way they work, they have also delivered opportunity.
     

    The way that brokers have traditionally placed BTL cases is no longer appropriate for portfolio landlords. Whereas a BTL transaction was previously driven primarily by the rental calculation, now criteria plays a much more significant role in choosing the right solution for your clients.

    Lenders have all introduced their own interpretation of the guidelines and have applied stress tests in different ways, with different documentation requirements. This means that a BTL transaction is now a much more involved process and sourcing systems are rarely equipped to provide the full picture.

    Brokers who have adapted best to the changes are those who have taken a considered approach to portfolio landlord business – obtaining a portfolio document upfront that details the properties in the portfolio, mortgage and repayment information and rental income. 

    Taking this upfront approach also presents more imaginative opportunities for raising finance, with a loan secured across multiple properties in the portfolio. Often, for example, a client might want to borrow up to 85% LTV, which is not likely to be possible with current stress test requirements. But, by reviewing the portfolio as a whole, you could identify opportunity to raise finance elsewhere on multiple properties at lower LTVs.

    According to last year’s housing white paper, more than four million households rent their home from a private landlord and UK Finance said that while only 7% of landlords own five or more properties, these larger landlords account for nearly 40% of rented dwellings.

    This means that there could be 1.6 million rental properties held within portfolios that could be used as security to structure more imaginative solutions for brokers’ landlord clients, providing them with opportunity to access larger loans and greater leverage to grow their portfolios.

    PRA regulations have changed the way brokers work with their portfolio landlord clients, putting greater emphasis in developing a more thorough understanding of their investment portfolio and this knowledge gives brokers a great opportunity to identify new ways of meeting their lending requirements.

    Read more

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This website is for authorised intermediaries only. This information has not been approved for use with customers and is not intended for public or customer use. Your clients’ property may be repossessed if they do not keep up repayments on a mortgage or any other debt secured on it. Loans are subject to status, terms and conditions.

Castle Trust Bank means Castle Trust Capital plc, a company incorporated in England and Wales with company number 07454474 and registered office at 10 Norwich Street, London, EC4A 1BD. Castle Trust Capital plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under reference number 541910. Buy to Let is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

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