David Barral, the former CEO of Aviva’s life insurance business, has been appointed as Chairman of Vantage Finance, one of the UK’s leading master brokers. David joins Vantage’s Board at an exciting time for the business, following investment from private equity firm, Chiltern Capital, earlier this month. He will be working with Vantage to sustainably grow the business across its current sectors, as well as identifying opportunities to enter new adjacent markets when the timing is right.

With a 35-year career in financial services, David joins from Aviva Plc, where until June 2015 he was the Chief Executive Officer of UK and Ireland Life insurance, the largest business unit within the Aviva group.

David brings a wealth of strategic leadership and operational experience, with a strong track record in growing businesses through intermediaries. He is a non-executive director of LV=, non-executive chairman of Virgin Wines, a former Chairman of the ABI Retirement and Savings Committee and a regular contributor to Speakers for Schools, the independent education charity.

David commented on his new role: “I am extremely excited to join Vantage Finance at a time when it is strongly positioned for further significant growth. Over the last 12 years Lucy and the team have established Vantage as a highly respected business in the intermediary market. It has an enviable reputation for its expertise, efficiency, proactive communication, and quality of service. I look forward to working with the team to build on this success and achieve our ambitious growth plans.”

Lucy Hodge, MD of Vantage Finance, commented: “Now is the perfect time to introduce someone of David’s calibre to the Board at Vantage Finance, following our recent partnership with Chiltern Capital. David’s industry knowledge and experience is invaluable, and we’re delighted that he’s chosen to join Vantage as we embark on the next phase of our growth strategy.”

With the upcoming stamp duty hikes for buy-to-let properties just around the corner, there’s a palpable sense of anticipation amongst professionals as to how the market will react come April 1st. I have come across various articles recently forecasting a mass market exit and even the “death” of the buy-to-let mortgage altogether, and I can’t help but feel that the majority of these predictions have been greatly exaggerated by the media. For the wider buy-to-let sector, lending volumes will undoubtedly – if only temporarily – slow, but I don’t expect the tax increase to have anywhere near the same affect on the bridging market.

The brunt of the stamp duty change is more likely to be felt by the consumer buy-to-let area of the market rather than professional landlords and specialist investors, which tend to make up the majority of bridging loan clientele. New and inexperienced investors, perhaps looking to purchase their first buy-to-let property for future capital growth, may have to reconsider their finance strategies in order to accommodate the changes, but I doubt the increase is significant enough to deter potential market entrants.

As for the top end of the market, landlords and property professionals have had good time to prepare for the tax hikes, and I expect most have already adapted their business models to offset the additional costs. Whether this translates to a rise in rental prices is yet to be seen, but from the conversations we’ve had with our own clients, although the surcharge is clearly unwelcome, it poses minimal risk to bridging volumes.

For investors with particularly large portfolios, buying through a special purpose vehicle could offer a way of avoiding the tax rises. As a means of encouraging investment in large-scale housing, companies with more than 15 residential properties may be exempt from the increase. Although this will only apply to the very top end of the market, it may well contribute towards the growing number of investors setting up limited companies in order to avoid the cap on mortgage interest relief.

Predictions of panic in the market have certainly not come to fruition. The surge in landlords looking to complete before the new tax regime comes into place is a logical decision for professionals with investments already in the pipeline, rather than a case of “panic buying”. This being said, activity in the market around buy to let hasn’t felt as chaotic as we have been led to expect. We may well see a further increase over the coming weeks and even if this does result in a market bubble and slump either side of April, I envisage the impact to be short-lived.

In terms of the long-term affect on the market, it’s worth keeping in mind the government’s reasoning behind its housing policy. If the surcharge achieves its goal of slowing house price growth and creating a more level playing field for owner-occupiers, it should create a more competitive market place, which could open up a number of opportunities for clients, in particular bridging developers.

The buy-to-let sector proved its mettle in the face of numerous threats to market growth last year, and I suspect the increase in stamp duty tax is the first – and certainly not the last – challenge we are set to face this year. For the bridging sector in particular, the increase is certainly more of a molehill than a mountain to overcome and I wouldn’t be surprised if bridging volumes show little fluctuation in its wake. Bridging clients generally remain some of the most experienced and sophisticated investors, and I have no doubt that the majority have already adapted and readjusted to what is effectively a new cost of entry to the market.

By Lucy Hodge, Director, Vantage Finance

For many industries, January can feel like a somewhat sluggish month compared to the buzz of Christmas and year end. But for the bridging industry, the start of 2016 is anything but a time for complacency. Following the sector’s unprecedented growth in 2015, brokers have a lot to look forward to and general sentiment is positive.

Looking back
It’s no secret that 2015 saw an unexpected and much-welcomed surge in the value of bridging loans transacted. The prospect of a £3bn bridging industry is no longer a matter of ‘if’, but ‘when’, and if we consider the real depth of the industry, including the smaller boutiques and private lenders who are transacting within the space alongside more familiar names, I suspect we have far surpassed this milestone anyway.

In 2015 this growth continued in spite of a number of political changes, which threatened to decelerate the market. Looking back, we can certainly see a dip in activity either side of the General Election, but the market bounced back surprisingly quickly and, for many brokers, business was only temporarily affected. Similarly, the higher end of the market proved its resilience over the course of the year, as activity returned to normality following the stamp duty changes announced at the end of 2014.

Looking forward
Can we expect to see a similar rate of expansion in the industry during 2016? My view is that the market will continue to see solid growth over the next twelve months, and the industry is starting 2016 with confidence and anticipation for a positive year.

I also anticipate that the rate of new entrants will outstretch demand this year, and as a result, some of the smaller boutique lenders may struggle to compete with the bigger, more established names. There may need to be some form of consolidation to ensure a sustainable market moving forward and this could come in the form of mergers and acquisitions or even the exit of some lenders from the sector altogether.

That said, product rates are surely set to continue to fall with some lenders, bringing down the average rate. There are already a number of lenders offering products at rates below 1% and as competition intensifies, I anticipate lenders will continue to introduce more innovative products at ever-cheaper prices.

The new stamp duty rate on buy-to-let properties is on everyone’s minds at the moment and I think most professional landlords have taken the right approach in viewing the change as another running cost to business, with an objective and long term view applied. The market will undoubtedly slow once the rates come into effect in April, but this is not necessarily a bad thing. The bridging industry has proven its ability to bounce back from such economic factors, and a temporary slow in activity may be beneficial in the long run, as a means of avoiding a market bubble.

Although there is a lot on the cards for 2016, I expect the general usage of bridging loans and client-profiles to remain fairly consistent. The emphasis this year should be on maintaining the level of growth we have achieved in a sustainable way. The Mortgage Credit Directive is a step in the right direction in ensuring that amidst the excitement of the growing market, maintaining industry standards remains front-of-mind.

By Lucy Hodge, Director, Vantage Finance

Vantage Finance, one of the UK’s leading master brokers, has announced the creation of a dedicated business development team, to help grow its broker network across the UK.

Vantage has appointed two Business Development Managers: Sashi Butcher and Jules Dias, who will work alongside the company’s Head of Sales, Tim Bennett, as part of a new dedicated team. The pair will be responsible for generating and managing fresh business leads and developing Vantage’s growing network of brokers and financial advisers.

Sashi brings a wealth of expertise to her role, with over 30 years’ experience working across retail and corporate banking with banks such as Barclays, HSBC and Allied Irish Bank. Jules also joins the team following a number of business development roles, most recently at Loan Engine, an established loan broker based in Watford.

Sashi commented on her new role:
“I’ve been involved in a number of roles managing client relationships and portfolios at big banks, but the packaging industry has a completely different attitude towards finance. The flexibility to choose from different lenders to source finance for each individual means I can offer a more tailored, personal service to clients. It’s a whole different way of doing business, and I’m really enjoying being involved in the entire process, from the point of introduction to completion.”

Vantage Finance has secured inward investment from private equity firm, Chiltern Capital. The investment marks a significant new chapter in Vantage Finance’s story, and will enable the business to continue its ambitious growth strategy as one of the UK’s leading master brokers.

Chiltern Capital has taken a significant minority stake in the business and will work closely with Vantage Finance to build out its management structure and further develop its distribution channels and capabilities in the intermediary market.

Lucy Hodge, MD of Vantage Finance, commented: “This is a hugely important moment for Vantage Finance, and testament to how far the business has come since our launch in 2004. The investment will allow us to take our growth and expansion even further, continuing to offer the intermediary market the rigorous approach to quality and service delivery for which Vantage Finance has become known.

“I would like to thank every one of our intermediaries and lender partners for their commitment and loyalty so far, and share our excitement in the journey that lies ahead. As we grow, our focus will always be on providing the best possible offering and achieving good customer outcomes for every partner that we work with”

During 2015 and 2016, Vantage Finance has invested in a number of hires to support its development and growth. Most recently, the business bolstered its compliance team with the hire of Tracy Debenham, who will focus on ensuring Vantage’s consistently high standards in compliance and monitoring are maintained. Alex Sheffield of Chiltern Capital, said: “We are delighted to be partnering with the team at Vantage Finance. This is characteristic of a Chiltern investment, providing strategic support and backing to an ambitious MD of a growing business in a sector with positive market dynamics.”

I recently saw some research by MTF that found a rising number of brokers are resorting to bridging loans for clients who fail to secure a mortgage. I was surprised to find that in the fourth quarter of 2015, more than half of brokers turned to bridging finance as an alternative source of funding to fill a liquidity shortfall. Bridging loans are often a viable solution for temporary liquidity shortfalls, but for more long-term affordability issues, bridging shouldn’t be viewed as a panacea.

Change in perceptions
Long gone are the days when bridging loans were considered a last resort for funding and no doubt the market’s recent success is thanks to a change in perceptions around bridging. As more lenders have entered the sector, bridging products have become both more sophisticated and accessible to the wider market. However, the recent flurry of regulatory regimes has placed perceived barriers in the way of BTL landlords – and as often is the case, the less experienced investors are set to feel the brunt of these changes.

Tougher regulation
The PRA’s consultation around introducing tougher affordability tests is the latest of these proposals. Many professionals in the sector have already touched upon the fact these changes may well be to the advantage of those operating in the specialist lending space. Nevertheless, regardless of the outcome of the consultation, brokers should not be tempted to revert to using bridging facilities as anything other than a short-term solution to funding.

Delaying the problem
When considering the suitability of a bridging loan, the focus should always remain around the client’s exit strategy. Generally, borrowers who can’t achieve a mortgage for short-term affordability reasons will only use a bridging facility if they plan to exit through the sale of a property in the near future. With the PRA’s proposal applying to new BTL landlords, I can’t imagine an exit through sale would be the end-goal for most investors. If not, a bridging loan would only defer the problem rather than solve it. For cases where unique circumstances mean that clients do not currently meet the criteria for more traditional funding solutions, for example if they’ve recently taken a new job, or are awaiting capital from something like inheritance tax, then bridging loans are of course a reasonable option. It is the temptation to stray from the traditional principles of bridging that may pose a problem.

Ultimately, the aim of tougher affordability tests is to build a sustainable market and if that means a market readjustment then so be it, I don’t think the consequences are too troubling and investors will start to accept the new norm. My hope is that both brokers and lenders will continue to act in the best interests of their clients. The specialist lending market should take full advantage of these changes, but in areas as specialised as bridging, the emphasis must remain on ensuring all lending is appropriate. As regulators continue to introduce added protections for borrowers, we too should recognise our responsibility to maintain a sustainable market.

By Lucy Hodge, Director, Vantage Finance

Vantage has appointed two Business Development Managers: Sashi Butcher and Jules Dias, who will work alongside the company’s Head of Sales, Tim Bennett, as part of a new dedicated team. The pair will be responsible for generating and managing fresh business leads and developing Vantage’s growing network of brokers and financial advisers.

Sashi brings a wealth of expertise to her role, with over 30 years’ experience working across retail and corporate banking with banks such as Barclays, HSBC and Allied Irish Bank. Jules also joins the team following a number of business development roles, most recently at Loan Engine, an established loan broker based in Watford.

Sashi commented on her new role:
“I’ve been involved in a number of roles managing client relationships and portfolios at big banks, but the packaging industry has a completely different attitude towards finance. The flexibility to choose from different lenders to source finance for each individual means I can offer a more tailored, personal service to clients. It’s a whole different way of doing business, and I’m really enjoying being involved in the entire process, from the point of introduction to completion.”

Jules also commented:
“The team at Vantage has a great level of knowledge in dealing with complex cases, and I’m thoroughly excited to be involved in the development of a business whose reputation speaks for itself.”

Lucy Hodge, Managing Director of Vantage Finance said:
“We are receiving an increasing number of enquiries from brokers across the UK and our new business development team has been put in place to take full advantage of incoming opportunities and help Vantage continue to grow.

“Sashi and Jules are highly experienced in analysing the market and securing new leads, and both have demonstrated a proactive attitude within their first few weeks. We look forward to the value they will no-doubt bring to our team.”

A new report into specialist property investment finance shows lenders are still largely positive about the market. Vantage Finance, one of the UK’s leading master brokers, has released its inaugural Vantage Point report, which gives an overview of certain aspects of the specialist lending market from the perspective of 32 lenders.

The report shows the last six months have been particularly positive for lenders, with over 50% recording an increase in lending volumes in all surveyed areas, with the exception of Holiday Lets. Expectations for lending volumes over the next six months were generally lower, but growth is still expected in a number of areas. Ninety-one per cent of lenders surveyed forecast growth for Ltd Company But-to-let (BTL) Finance, whilst 81% expect to see an increase in HMO Finance and Development Finance and 79% in Bridging Finance. Nearly half (48%) of lenders expect to see an increase in BTL Finance over the next six month, down considerably compared to the last six months, where 81% of lenders recorded an increase.

Market Influences

The report also explored lenders’ thoughts around a number of economic, political, legislative, and regulatory constraints coming into play. Nearly a third (31%) of lenders that answered on recent changes to BTL stamp duty saw it as the biggest threat to the market.
Unsurprisingly, 59% of lenders do not expect to see an interest rate rise within the next 24 months, whilst 30% do not expect to see one within the foreseeable future.
Nearly a quarter (23%) of lenders surveyed also felt the industry is unprepared for the legislative changes which recently came into place under the Mortgage Credit Directive (MCD).

Property

The survey also found the majority (83%) of lenders expect property prices to continue rising over the next 12 months. Many attributed this trend to the simple fact that demand still outweighs supply. Nearly half (48%) of lenders expect to see the biggest level of investment in the South East, whilst London and the South West scored particularly low with only 7% and 3% respectively.

Opportunity in the Market

Product innovation was ranked as the biggest opportunity in the market over the next 12 months, earning over half the votes (52%), with comments qualifying it as a solution to the market’s increased competition and bottomed-out rates.

Broker/Lender Relations

Forty-one per cent of lenders who answered on experience ranked it as the most important quality when considering new broker partners

Lucy Hodge, MD of Vantage Finance, commented on the report:

“Vantage Finance is one of the UK’s leading master brokers and as a key mediator between lenders and intermediaries over the last ten years, we place great value on the relationships we hold with our lender partners. Part of what makes these relationships so effective is a high level of transparency, communication and mutual understanding.

“In our inaugural Vantage Point report, we wanted to build on these principles of communication and openness by giving lenders the opportunity to share their current views on the specialist lending market.

“The previous six months were undoubtedly prosperous for most lenders and given the recent constraints within the market, a short-term dip is expected. Nevertheless, general sentiment remains positive and the impression is that the specialist lending market has much to look forward to.”

Click here to view the full report.

The buy-to-let (BTL) market is continuing to boom thanks to a number of factors contributing to steady tenant demand across the country. Figures from lender Paragon Mortgages last month revealed the average void period for the third quarter of 2015 fell below the record low of 2.6 weeks per annum. This is promising news for landlords and brokers alike, but as the risks from extended void periods diminish, we shouldn’t lose sight of their importance as part of any BTL investor’s business plan.

For landlords, a void period (the period of time between tenants) means a gap in rental income, and until a new tenant is secured, they must find a way to cover the property’s overheads. However, the prospect of a void period shouldn’t strike fear into the heart of landlords. Voids in tenancy are an expected and inevitable occurrence in every rental investment.

The good news for our landlord clients is that the market is currently seeing a trend of shrinking void periods. The most recent averages reflect levels unseen since 2002 and general feeling amongst landlords is that tenant demand is stable, with many predicting further growth.

The market is a very different place compared to the last time we saw void periods this brief, back when lending was based entirely on rental income. Following the market crash, the BTL industry suffered heavily as lenders exited the market. The majority of remaining lenders imposed a minimum outside income of £25k or more and disregarded applicants’ other cash sources such as assets, in order to minimise risks. Today, however, a good broker will judge an applicant’s affordability on their overall financial position, considering disposable income and other cash reserves to cover the risks of rental voids.

Despite current low levels, void periods are still a crucial consideration for every landlord’s budget, and as a rule of thumb I always recommend brokers ensure landlords are financially prepared to weather a void period of at least four weeks per year on each property. There are a number of precautions that investors can take to reduce the risk of lengthy void periods. For your experienced clients these may be a given, but for new landlords I would always advise they have considered the following:

Tenancy periods – different tenants look for different tenancy periods. If your client has budgeted for a year-long tenancy but then agrees to a short-term tenancy of 10 months, rental income will fall short

Happy tenants – it may seem obvious but a happy tenant is a paying tenant, so it’s important clients are able to maintain their investments and provide a good service for tenants

Unforeseen costs – it’s always worthwhile to ensure clients have budgeted for unforeseen costs, such as maintenance and repairs

Tenant acquisition – landlords may have planned for void periods, but they often forget to allow for the costs of acquiring new tenants. Depending on the method used and the amount of time it takes to find a new tenant, these can mount quickly

The rise in demand for rental accommodation has been exponential, and although recent figures may have been influenced by the start of the university year, it appears that the demand for rental accommodation will continue to increase for the foreseeable future. This being said, demand varies significantly by region, and void periods can be affected by a number of factors, outside the landlord’s control.

It is still as important as ever for brokers to ensure BTL borrowers are prepared for void periods and with effective preparation, budgeting and management we can ensure the mutual benefits from shorter void periods continues…

By Lucy Hodge, Director, Vantage Finance

After much anticipation the Mortgage Credit Directive is finally here. Whilst lenders and brokers operating in the first and second charge market have had ample time to adapt their processes and procedures ahead of the changes, the new legislation also has implications for those advising on buy-to-let (BTL) mortgages. The introduction of the ‘consumer’ and ‘business’ BTL categories means that around 10% of BTL lending will now fall under the regulation of the FCA. If you’re a broker advising on BTL mortgages it’s important you ensure your clients receive the right protections.

Consumer vs business
The FCA has introduced the consumer BTL differentiation in an attempt to provide more protections for new or less experienced landlords, sometimes referred to as ‘accidental landlords’. Examples of borrowers that fall under the new consumer BTL category include first time landlords who decide to rent out either a previous place of residence or a property they have inherited. The majority of other lending activity involving experienced landlords and those purchasing with the sole intention to let are now considered business BTLs and will remain unaffected.

Scope for flexibility
As with most regulation, there will inevitably be circumstances where individual cases test the rigidity of the legislation and the FCA has allowed lenders a level of flexibility in interpreting which BTL category borrowers fall into. For brokers, it’s important to ensure you are aware of the legislative requirements that define consumer and business BTL borrowers and how your different lenders interpret these categories.

At Vantage Finance, we have been operating under the directive’s new requirements for a number of weeks. A good example of a case that tests the line between the two new borrower definitions is a couple that were recently introduced to us.

The couple were looking to raise finance in order to purchase a new property to move into and rent out their current place of residence. According to the new legislation this case would fall into the consumer category of borrower. However, because the couple are experienced landlords who already manage a number of rental properties, we felt they were better suited to a business BTL product.

As a consumer BTL borrower, the couple would have been treated as inexperienced landlords and subjected to the FCA’s new affordability check – something in this circumstance we felt was unnecessary due to their level of expertise in the market.

Following a discussion with the lender involved, it was decided on this occasion the application should be classed as a consumer BTL, but a case could easily be made for either category.

Know your customers, know your legislation, and know your lenders
It’s still early days, but it’s reassuring to see lenders are open to discussion on these cases. Regardless of the outcome, the most important thing is that borrowers receive the necessary protections and the most suitable product for their needs. For brokers, it’s a question of knowing your customer, the legislation in place and how your different lenders interpret this legislation. Although the majority of cases will be clear-cut, the few cases that blur the line between business and consumer BTL will require a strategic approach. Lenders are bound to remain cautious for the initial period, but I would encourage brokers operating in the BTL space to keep this flexibility in mind and consult with your lenders where necessary.

By Lucy Hodge, Director, Vantage Finance