Glenhawk aims to enter the specialized buy-to-lease (BTL) space in the last quarter of this year, the lender revealed in an interview with Mortgage strategy.
In a wide-ranging discussion, chief executive Guy Harrington said the company wanted to aim for the extremely specialized end: “Complex cases – offshore ownership, trusts, multi-unit freehold blocks, discretionary trusts… really quite bizarre BTL situations .”
He explains that in the regular BTL market, “margins are currently almost non-existent. As we have seen over the past few weeks, a few BTL lenders have pulled out of the market altogether or suspended their lending.
The type of borrower the lender would deal with would also align with the company’s philosophy, Harrington says. “We always want to be a specialist lender.
“We don’t have the cost of funds that a street lender has. By [lending] on the specialist side, we get the complex owners, the complex borrowers, and they fit well into bridging and into BTL, and they fit well commercially as well,” he said.
“And the commercial term is another area that we are exploring at the moment. [that would be] another string to our bow away from the residential side of the mortgage market.
Glenhawk sales manager Jamie Pritchard added that the company doesn’t want to just be a “us too” lender. He says, “We are going to get into BTL and it would be nice to convey that we have really thought about what the margins are and how competitive this market is. We don’t want to be a clone of another lender, because really, what’s the point if you don’t offer anything special? »
Other plans for Glenhawk this year include expanding its regulated side and using the opportunities offered by the new FCA authorization. He expects to receive new authorizations within the next three months. “It will allow us to lend to first and second-tenure homeowners, which will open us up to a whole different market segment – perhaps first-time buyers, specialty borrowers and retirement interest only,” Harrington says.
The discussion also touched on Glenhawk’s approach to environmental, social and governance (ESG) issues, updating Mortgage strategy to news in June 2021 that the lender had obtained a “carbon neutral” rating from the Carbon Trust.
Harrington says his team “hit gold” by bringing in Daron Kularatnam from Belmont Green, who now works as group treasurer and ESG director.
“He has an incredible passion for the environment, for sustainability and for reducing carbon emissions,” says Harrington.
“Darren came up with the idea of looking at the whole business – from people’s movements, to the paper we use in the office, to lighting, water and heating…we really have it all. disassembled and decided to offset where we are now and complete future offsets as we grow.
Harrington says work has continued with the purchase of 1,000 trees through Ecologi to mark Earth Day, “and this is really just the beginning. We want to increase the number of trees we plant based on the loans we give, to not only offset what we have here, but to go beyond that, which has been our ultimate goal.
“And we have invested in projects such as providing cook stoves to people in Kenya and water filtration systems in India. But it all goes through the carbon offset piece. We don’t just go out and buy trees.
Pritchard and Harrington also say it’s a growing problem for new and younger recruits. “I’m sure I speak for many junior team members when I say they care deeply about the environment and feel committed to taking care of it,” Harrington says.
He says he is often asked what Glenhawk does for the environment and is asked to detail his ESG policy during the interview. “If someone had said that to me when they came to work here a year and a half ago, I would have thought it was a little strange – why are you asking me that? You’d expect an investment bank to ask, or a funder to tick a box, but junior members of the team now almost have a sense of belonging in wanting to work somewhere socially responsible,” he said.
Pritchard adds: “After the lockdown, we really measured the mileage our staff walked. In the past I speak only for myself, I drove 30,000-40,000 miles a year across the country, quite inefficiently as well. We’re trying to be more efficient with how we drive across the country and where we need to be. Using Teams and Zoom also helps a lot. »
Both men also have strong opinions about the current state of “green” mortgages. Both are adamant that green concerns must be built into products at a fundamental level. Speaking of green-tinted loans that offer a discount, Pritchard says, “I think it’s like just planting a tree. If 60% of the carbon is emitted by properties, we need to come up with something that changes the mindset of owners, not just say “this is going to be better for your pocket”. It needs to be more thoughtful.
“Products should be ‘green’ in and of themselves,” Pritchard continues. “So whether it’s related to impending ESG changes for homeowners or some other angle, such as using the equity a borrower may have in their asset to fund improvements…there are definite connections between products and the environment.
Harrington: “It’s about thinking bigger than a token offer. What does a discount even do? My view is that you have completely fresh produce, and in that you have the carbon reduction. It could be owner-regulated self-builds, and for those who get a certain EPC rating, they get a discount. Ultimately it comes down to the asset you’re lending against and not putting a little bow on it and labeling it ESG friendly when it clearly isn’t.
House prices in 2022
“Inflation is, I think, much higher than what the media and the barometers are saying,” Harrington says.
“I think true inflation is probably 15%, maybe 20%. It’s going to bite. And if you look at credit usage recently through second charges and consumer credit data, borrowing has increased over the past two months, showing that people are borrowing to pay their bills.
The subject is, of course, expectations regarding property prices. Harrington thinks the factors detailed above will go some way to driving home prices down not this year, but in the first or second quarter of 2023.
Pritchard adds that financial pressures from rising energy prices will mean that many people who were considering taking their first step on the housing ladder will have to rent instead.
“There will be a lot more pressure on the ability to save for deposits,” he says. “Even on a 95% LTV mortgage, that 5% deposit amount increases on its own.”
Harrington points out, however, that “before…it looked like rates in the first quarter of this year were going to continue to skyrocket, and it still looks like that, but recently we’ve started to see the pricing pressures clearly from energy, and also what has come to the fore in recent days in China.
“The huge blockages that are taking place there [in Shanghai at the time of writing]make it likely that interest rate hikes in the Western world will be moderate.
“So really, weirdly, the UK property market, which has always been relatively isolated, is being influenced by these huge macro decisions around the world.
“There are really a lot of factors…and it only takes one of those to run away and you may even see rates come back down. But as we’ve seen over the past six months, no one really seems to know which direction we’re headed.
Whatever new chaos the world unleashes next, it’s clear that Harrington and Pritchard take pride in their work. “We have a formula that works and we are achieving excellent volumes of unregulated and regulated transition. Last month was our peak month and I think this month will be higher,” Harrington reports.
“We’re seeing speculative developers, really great auction buys, repeat customers coming back…now our customers are used to the way we operate, and we have a reputation of being around for four years, which we’re not not just a fly – An overnight lender who started four months ago with lots of cheap money.
“We are starting to reap the rewards of our time and, like any business, we want to grow and accelerate in other product areas. This is the year we are going to do it.