Hope Capital enters bridgeto-let market

Following the launch of its new Bridge 2 Let and Term 2 Rent products, Hope Capital’s sales director Roz Cawood discusses the options’ flexible features and the lender’s expansion plans for the months ahead

Only a week after the Bank of England increased its rate in February, Hope Capital made waves in the market with the introduction of two products— Bridge 2 Let and Term 2 Rent—to boost its specialist finance proposition.

The new Bridge 2 Let option offers loans of between £150,000 and £1.5m at up to 75% gross LTV, with rates starting from 0.72% per month. The product caters for UK, foreign national and expat borrowers, and is available for a range of properties in England, Wales and Scotland, including residential, commercial, semicommercial, HMOs and MUFBs. Borrowers can secure this product on a loan term of up to 36 months; 12 months is allocated to the bridging facility, with the remaining 24 months for the term loan. However, Roz explains that borrowers can swap from the bridging option before the 12-month mark, should this be better for them. The minimum loan term for the bridging portion is three months.

Meanwhile, the Term 2 Rent offering is designed for the same borrower profile looking to acquire or refinance incomeproducing, commercial or specialist residential assets (including HMOs and MUFBs), who don’t want to be tied into long-term lending contracts with large ERCs. It provides loans from £150,000 up to £1.5m at a maximum LTV of 70% (net of Hope Capital’s facility fee), for properties in England, Wales and Scotland. Borrowers can opt for a variable-rate option, with pricing starting from 6% plus Bank of England base rate per annum, or a fixed rate from 11.5% per year. Roz explains that this is more of a hybrid product, as the loans are underwritten as a bridging facility, but will have an annualised rate paid monthly, similarly to a BTL mortgage.

ICR

Sidelined

Perhaps the biggest selling point is the lack of ICR calculations—something causing problems for borrowers lately. “A lot of people are struggling now because rents haven’t been going up in line with interest rates. You’ve also got people coming off their fixes who are struggling to refinance if they can’t meet the ICR calculation. For our products, you only have to cover 100% of the monthly payment. Of course, the property needs to be income producing, but you don’t have to service the loan from that property alone. If you’ve got a BTL portfolio or other income streams, and as long as you can demonstrate serviceability, we can use that for our calculations,” clarifies Roz.

In addition, the Bridge 2 Let proposition allows AVMs and desktop valuations for the bridging portion of the facility, as well as the ability to opt for dual representation for auction purchases. Roz believes both of these are valuable qualities of the new products and will boost the speed of completion.

For deals that use the bridging side of the facility to carry out property refurbishment, Hope Capital will conduct a site inspection to make sure the works are complete before moving to the term loan. Roz tells me this can bring additional opportunities for borrowers; Hope Capital uses the GDV of the property, as opposed to the initial valuation, which means borrowers could potentially raise extra money if they can prove the property has increased in value. Why launch now?

As we chat about the finance provider’s new range, Roz divulges that the idea was something the lender had been contemplating and working on in the background for a while—going back to when she joined the business in June 2021. “We did a lot of research at the time, but [launching them] didn’t really fit with our strategy at the time, as we were concentrating on other products. But it seems like now is the right time to bring them out.”

The reason why February 2023 was the opportune time was based on various factors, she explains. Hope Capital saw a number of lenders that were already operating in the bridge-to-let space temporarily or permanently pulling their products on the back of the interest rate volatility following the mini-budget. “[We’ve seen] a lot of lenders withdraw their products, perhaps because it was too difficult to work out what a good rate would be,” says Roz. The second factor was borrower demand for products with not only a more flexible ICR calculation, but shorter-term facilities as a result of market unpredictability. “With the likes of semi-commercial and commercial properties, [most products] available at the moment are five-year fixes, and some people are reticent about opting for this when they’re unsure of where the market’s going.” This means that property investors are looking for shorter-term loans in a bid to keep an eye on the market and fix at a later time—when rates might go down—to potentially secure a better deal.

Roz also hopes the new products will allow the lender to retain clients for longer, as the Term 2 Rent option can and will be offered to existing clients who may not be ready to exit their original bridging loans, but fit the criteria.

Products in the pipeline

With the offerings now available to brokers and borrowers, Roz is optimistic that both the Bridge 2 Let and Term 2 Rent options will open a new market for the company. While she emphasises there are no specific lending targets, both Roz and the team hope to see the number of loans completed via these new products contribute to 10% of its overall business in 2023.

Furthermore, the lender has plans to expand its team this year, having already grown the sales division to eight people in 2022. Hope Capital is now keeping an eye out for new underwriters and senior underwriters. “We’re looking to grow in all areas of the business in order to meet our plans—the last thing you want to do is bring out new products and increase the appetite for brokers, only to then not be able to deliver on it with service,” says Roz.

The finance provider is also gearing up to launch its new ground-up development offering, following a pilot that lasted a few months. Surprisingly, Roz tells me the proposition was meant to be brought out last September, but was postponed in the aftermath of the mini-budget. “We were in a fortunate position that we could hold our pricing because we are forwardfunded. So, when interest rates started to increase and everybody followed suit by putting their rates up, we held ours where they were. That resulted in us doing as much business in a week as we were previously doing in a month, which contributed to the big growth we had last year; we saw our lending increase by 144% in 2022. Therefore, it didn’t seem right to bring out a new product while all that was going on. Everybody was working very hard to deal with all the enquiries and new business coming in.”

Now, Hope Capital is focusing on identifying the best time to introduce its ground-up development offering. “It’s more or less ready to go—it’s just finding an appropriate time for that to be launched.” Roz also hints that the lender is considering unveiling a standalone second-charge proposition as well—though she says this will be much further down the line.

Overall, Roz is optimistic that this year will be kinder to the market compared to the past 12 months. “With interest rates hopefully beginning to stabilise, at least it will be a little calmer. It’s going to be an interesting year, but I think it will be a positive one.”

Along with our ability to provide a decision in principle in minutes, our buy to let range can support a variety of needs with key criteria including:

5-year fixed assessed at pay rate

Top slicing available from 110% ICR across the range

Options for personal ownership, HMO, limited company and portfolio landlords