Expanding Horizons: Opportunities in the Bridging and Commercial Mortgage markets

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1 Expanding Horizons: Opportunities in the Bridging and Commercial Mortgage markets FOR INTERMEDIARY USE ONLY Aldermore Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. (Financial Services Register number: ). Registered office: 1 st Floor, Block B, Western House, Lynch Wood, Peterborough, PE2 6FZ. Registered in England No

2 Changing landscape of banking Buy to let: Tax changes Bridging: market overview and emerging trends Commercial finance: Government Referral Scheme Value added by broker and specialist lender Relationship management and banks Summary Agenda

3 Changing landscape of banking Source: Mortgage Strategy Market Watch Source: Bridging and Commercial Source: Mortgage Strategy Market Watch Source: Mortgage Strategy Market Watch Source: Bridging and Commercial Source: Business Moneyfacts

4 Buy-to-let: Tax changes Changes in pension legislation unlocking the availability of pension funds Changes to taxation rules following the 2015 summer Budget affecting landlords and limited companies owning buy to let A tax on landlords or a tax on tenants? Impact on private individuals Impact on limited companies Stamp Duty Limited company buy-to-let transactions in December accounted for 38% of all business, up from 15% in October* * Mortgages for Business buy-to-let index

5 Buy-to-let: Impact of tax changes What do the upcoming tax changes mean to landlords? It s complicated TAX ADVICE TAX ADVICE TAX ADVICE

6 Buy to let: Example of tax changes Experienced landlords. The first property purchased in Now have 16 properties which are all in their personal names All in the London area. Combined value approximately 5,160,000 generating gross rental income of approximately 354,000 pa. Apart from the rental income they both have employed income of circa 120,000 Plan to grow the portfolio. Acquiring up to 10 properties in next months which require refurbishment Portfolio geared at around 58%. So not impacted by lower LTV availability of commercial lending Now restructuring by transferring properties into new limited company. Phasing to manage capital gains tax impact. And re-establishing return on equity

7 Total Gross Lending ( b) Bridging: Market overview and emerging trends Bridging Gross Lending ( ) Leading reasons for bridging finance 4% 16% Auction Purchase 33% Business Purchase 22% Speed 4% Re-bridge Refurb Source: West One Bridging Index

8 Commercial finance: Government Referral Scheme Government view that: - Largest four banks account for over 80% of SME main bank relationships - Majority of SMEs approach their main bank first - Around 60% of first time SME borrowers are unsuccessful - And circa 40% then give up Government sees intervention as necessary Aims to give SMEs better access to funding What about existing referral relationships?

9 Value added by broker and specialist lender Residential Investment 4m loan secured via a large apartment block in major county town. Agreed at 75% LTV (10 years interest only with a small tranche of amortisation) The customer chose Aldermore because we were able to offer a structure and pricing that worked for them We provided a credit-backed offer within 7 days and completed the deal within 3 weeks (full legal title) Commercial Investment 560, years interest-only against industrial unit in a major UK city suburb 70% LTV let to decent covenant with 8 years unexpired on lease We were able to lend on interest only basis by cross collateralising with existing facilities The deal completed within 30 days of credit sanction

10 Demise Relationship of the management High Street bank? and banks Declining number of bank and building society branches Number of branches Source: University of Nottingham

11 Working in partnership with you High street no longer offers relationship management Where do SMEs go? Or business consultant? Or trusted adviser? Broker or intermediary? The value added by the broker The need for holistic advice Income tax planning Pension planning Exit strategy Inheritance tax planning

12 Summary Tax changes and the need to help customers maximise their return on investment, increases the need for advice and guidance The government believes that intervention is necessary. Should result in new opportunities for brokers The role of the intermediary has evolved. Customers need a relationship and more holistic advice