Octane Capital launch ‘Productless’ BTL mortgage range

Octane Capital launch ‘Productless’ BTL mortgage range

8:26 AM, 12th May 2017, About 7 years ago 7

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New lender to the market Octane Capital, set up by the founders behind Dragonfly Property Finance, has launched its Buy to Let lending with a no “off the shelf” product offer.

Instead of a range of prices based on Loan to Value and criteria Octane Capital will base the cost of the mortgage on the perceived risk the borrower represents to the lender.

They will lend to individual landlords and companies with a minimum criteria of rental income covering 100% of the mortgage interest pay rate as opposed to the traditional 125% and under the latest PRA rules 145%. Minimum property value will be set at £100,000.

The MD of Octane Capital, Mark Posniak, has said that he does not require a computer to tell if a potential borrower is a good risk or not and will consider all a customers circumstance not just if they have missed one mobile phone bill payment.

The Chief Executive and founder, Jonathan Samuels, said; “Loan to Value clearly has a role to play for any lender, including ourselves, during the assessment of risk, but in our industry we believe there is a huge over reliance on it that can work against lenders and borrowers alike.

“Charging someone X percentage if they have a 30% deposit and Y percentage if they provide a 40% deposit is often misguided as the borrower with the smaller deposit can be less of a risk once you drill down into the detail.

“As a result, we’ve decided to launch without a set product sheet with a list of rates based on Loan to Value.

“Instead, each loan will be priced according to its level of risk. This new blank canvas approach has left some people scratching their heads, but for us it’s a far more sensible way to offer loans.”

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Dr Rosalind Beck

9:44 AM, 12th May 2017, About 7 years ago

Sounds sensible.

Luke P

10:37 AM, 12th May 2017, About 7 years ago

Reply to the comment left by "Dr Rosalind Beck" at "12/05/2017 - 09:44":

Sounds great apart from the minimum £100k.

I have 30 years experience, manage 300+ properties, have over 150 of my own and nearly all were bought -even up to last week- at under £50k (and that's practically ready to rent, not wreckers). I think I know what I'm doing and I'm good in terms of risk, but minimum £100k for a BTL will not work far beyond the home counties...certainly not the North of England 🙁

Dr Rosalind Beck

11:01 AM, 12th May 2017, About 7 years ago

Reply to the comment left by "Luke P" at "12/05/2017 - 10:37":

Yes, it is a drawback, but they seem pretty flexible and may extend it to under £100,000 later on. About half of my portfolio is under £100,000 as well, and this is probably the bit of the offer that doesn't make sense as what would be the biggy if they lent on 2 x £50,000 houses?

Luke P

11:05 AM, 12th May 2017, About 7 years ago

Reply to the comment left by "Dr Rosalind Beck" at "12/05/2017 - 11:01":

You'd think this would be a better risk for them. I think I find it odd that on the one hand they're taking a whole new approach and view of the industry and the individuals that operate within it, yet still roll with an apparently arbitrary minimum value. Does it make a difference what the property is worth, as long as the risk is good...?

Dr Rosalind Beck

11:14 AM, 12th May 2017, About 7 years ago

Reply to the comment left by "Luke P" at "12/05/2017 - 11:05":

Yes, you could say that accepting two properties spreads the risk.

Cautious Landlord

14:04 PM, 12th May 2017, About 7 years ago

Surely the minimum loan (as inconvenient as it may be) has something to do with the bank's profit margins ? Assessing and administering a £100k loan will take the same time as a £50k loan but the potential income stream from the latter might well be half of the former. I suppose this could be dealt with by different arrangement fees etc but at the end of the day they are being quite sensible in setting a minimum surely ?

Luke P

14:38 PM, 12th May 2017, About 7 years ago

Reply to the comment left by "Cautious Landlord" at "12/05/2017 - 14:04":

Normally the fees charged by the lender cover the set up costs. After that, they're making a percentage and usually interested in lending out £XXX million with the split of that lending being of lesser importance. Spreading the risk is surely better. If they lend me £100k on two £50k properties and one of those properties becomes vacant, then I have only lost half of the income, whereas lending on one property worth £100k that comes empty present a higher risk. Perhaps they have their reasons, but there are vast swathes of the north of England, particularly the properties favoured by investors of BTL that are well under £100k. My point was, 'Hurrah!' for looking at the market differently; 'Boooo!' for not going far enough.

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