Loyds Bank provides £180mn for buy-to-let lender

Lloyds bank has entered into a £180million financial partnership with specialist buy-to-let lender, LendInvest PLC. The lender’s partnership with the leading high street retail bank will be a boost to the innovative lender’s business, helping the AIM listed company grow its buy-to-let lending business and securitisation programme.

Established in 2008 at the height of the financial crisis, LendInvest PLC has grown by operating a UK-based online marketplace for property finance. The company provides specialist finance to property investors and developers, and also provides high return opportunities for individuals, corporates and financial services institutions, investing in its property-backed loans.

Innovative technology platform

For over 12 years LendInvest has been using an innovative technology based approach to make property finance as simple as possible. The company has built an on-line asset management platform that is designed to make the process of getting a mortgage simpler, reducing form-filling and increasing the speed to get an approval.

With over £3.0 billion of mortgages under its belt the company works with funders and investors including private investors, pension funds, insurers and global institutions like HSBC, J.P. Morgan, Citigroup, National Australia Bank and now Loyds Bank – it was in 2019 that the company was the first UK Fintech to securitise a portfolio of buy-to-let mortgages.

Announcing the deal with Loyds in its half year results, published October 10, the lender’s financials show funds under management increased by 20 per cent year-on-year, to £3.4bn. The firm says it currently has more than £950mn of lending headroom to support its growth trajectory in the medium term. However, due to uncertainty in the wider market, the firm expects its rate of growth to slow down in the short-term, particularly in buy-to-let in the second half of this year.

Profit before tax for the full year is expected to be in line with last year, while LendInvest chief executive, Rod Lockhart says:

“We have taken this cautious approach mindful of the significant difficulties in short term forecasting given the economic and market backdrop.”

“The UK property finance market is ripe for disruption and our performance over the last six months reflects the attractiveness of our differentiated technology-driven platform for borrowers and funding partners alike.

“We grew across all lending products in the first half of the year, particularly in buy-to-let, but also in bridging and development which benefited from our innovative new broker portal.

“Looking ahead, we are acutely aware of the disruption in the UK mortgage market, which is affecting confidence and for the moment, applications for new mortgages have slowed across the market.”

Mr Lockhart points out that recent market “dislocation” demonstrates the company’s flexibility and speed to market capability using its platform, which gives a competitive edge and makes the firm confident in its long term prospects.

Financial disruption

Elsewhere, the immediate financial disruption has seen the majority of buy-to-let lenders pulling fixed rate mortgage products out of the market. Landlords wanting to secure a fixed rate mortgage deal who will now have to wait for lenders to launch new products, which will inevitably be at higher rates than previously.

So far, almost 40 lenders have removed their fixed rate mortgage offers to buy-to-let borrowers, with the possibility of more to be pulled from the market soon.

On-line mortgage aggregator, Property Master’s chief executive, Angus Stewart has said the situation is “extremely worrying” and has warned that landlords may have to wait until the financial markets stabilise before new products become available:

“We are seeing buy-to-let mortgage products removed from the market at an unparalleled level,” says Mr Stewart.

“We have also seen some newer entrants to the buy-to-let mortgage market withdraw their products as they have been unable to source their usual funds from institutional lenders.”

Mr Stewart’s advice is for landlords to secure fixed rate mortgages as soon possible when they are launched again:

“With base rate predicted to rise to 6 per cent within the next year or so, it is in landlords’ interest to act sooner rather than later, Mr Stewart says.

“The squeeze on private rental sector landlords continues from all angles, higher borrowing costs and recent increased regulation that has created an unprecedented level of uncertainty.

“Even the latest tax cuts from the chancellor Kwasi Kwarteng’s mini-Budget, could now be reversed.

“The fear now is that we will see many landlords choosing to exit the market resulting in a reduced supply of private rented property which will add further to the pressure on rents.”

The National Residential Landlords Association NRLA policy director, Chris Norris, is concerned, warning that many landlords do not have the means to continue to absorb rising costs:

“Landlords typically hold interest only mortgages, meaning rising rates and fewer products on the market will cause a considerable squeeze on many of their finances.

“Our data shows that 31 per cent of those landlords with a buy-to-let product plan to re-mortgage over the next 12 months, says Mr Norris. It also shows that interest rates rising to four per cent would mean around 30 per cent of those with a buy-to-let mortgage would need to divest all or part of their rental portfolio.

Mr Norris is urging the government to provide relief for both renters and landlords by unfreezing housing benefit rates, because, he says, “This [situation] would exacerbate an already serious supply crisis in the rental market. Failure to act now will leave an already depleted private rented sector in an even more precarious position.”