Page 29 - Bridging & Commercial Magazine Issue 5
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                                                                                                                                                                                                                                                                                                                   explains that its reputation as a regular issuer in the residential mortgage-backed securitisation (RMBS) market has allowed it to secure “fantastic rates” in the wholesale market. “Those rates translate into keen pricing for the consumers that we want to target. We are proving that you do not need to be competing for deposits to be a competitive lender.” Charles agrees, suggesting that securitisations are coming in at a similar level to retail deposit funding. Together, Pepper Money and LendInvest have completed securitisations, boosting their funding without needing to go through the onerous bank licencing process. Christian Faes, CEO at LendInvest, claims that its recent securitisation has given it funding that is cheaper than if it was a small deposit-taking bank. It is worth noting that these three securitisations were for regulated loan portfolios. EVEN IF YOU CAN ATTRACT SAVINGS DEPOSITS, IS IT STILL WORTH IT? Specialist lending is about more than just the cost of funds. It’s about quality of service, innovation and relationships built over long periods of time. In a space defined by fast-paced and bespoke offerings, a number of lenders I spoke to feel the associated PRA/ FCA regulations make a banking licence more of a hindrance than a help. “A banking licence can cause a bridging lender to lose sight of its core fundamentals, such as flexibility and entrepreneurial spirit,” says Gareth Lewis, commercial director at MT Finance. Colin Sanders, CEO at Tuscan Capital, believes that price has less importance in the bridging world. “Certainty of funding and the speed and consistency of decision making hold the upper hand.” Alan Margolis, director of credit and operations at Masthaven, admits that the higher regulatory standards and additional internal controls can make a lender less nimble. “No one can say that running a bank Roma_BC_205x140mm_HalfPageAd_Aug19_AW.pdf 1 29/08/2019 14:11 is the same as running a three-person lender which is completely unregulated, sticking to a very small niche of the market. Those are completely different businesses; you can’t expect them to be the same.” PRA/FCA bank authorisation can also be a significant financial burden and take as long as two years, according to Jason. Jon confirms that the process took Masthaven a similar amount of time and resulted in the hiring of an additional 60–70 employees to get the policies, process and technology in place before launching as a bank. Jon stresses that there is no lowering of standards by the regulators for new and smaller entrants. BANKING ISN’T JUST ABOUT CHEAPER FUNDING There are good reasons to become a bank that have nothing to do with securing cheaper funding. Reliability is one of them. Jon tells me that the falling away of funding lines during the credit crunch was the genesis for Masthaven going through the process to become a bank. Securitisations may be cheap and close to retail deposit funding rates now, but Charles maintains that the retail banking market is a far more resilient one. “If you look at the Bank of England, there \[are many\] years of evidence of the retail deposit market always being there and people being able to raise money through it.” Jason highlights that becoming a bank will distinguish Recognise from other lenders and is also conducive to its ambitions for scale and building a brand. Charles says that there’s significant franchise value. “When you have a bank, you have scalable infrastructure, you have got a resilient business model. Those four letters carry a lot of trust.” View                                         The property investment mortgage with built-in advantages     C M Y CM MY CY CMY K   Use our new 5-year term mortgage to transition from your bridging loan to a competitively priced mortgage product, or for purchasing investment property. There are no income requirements, we can even use top slicing for affordability and we’ll consider first time landlords. What’s more, there’s no 6 month rule on ownership and it can be used to for capital raising on the next investment property project. Key features of the new 5-year term mortgage are: • A variable rate of 4.24% + bank base rate • Maximum loan size £500,000 • Maximum LTV 75% • Title Insured Call now to discuss how you can use this product to finance buy to let and HMO properties.             0161 817 7480 | This advert is exclusively for the use of Financial Intermediaries and Professional Property Investors. Romaco Limited (t/a Roma Finance) 15 Carnarvon Street, Manchester, M3 1HJ  

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