Tell me more about the rate ranges

We assess each loan individually and use a risk matrix, which takes into account the following to calculate the risk rate ranges: 

Bridging Loans

• Loan-to-Value (LTV) - The value of the loan measured against the value of the security. The lower the LTV, the further the value of the property used for security would need to fall for the loan to be at risk. Lower the LTV the lower the probability of loss
• Anticipated Time to Sell - The length of time it would take to sell the property used for security
• Proposed Exit - The borrower needs to have a clear and realistic plan to repay the loan. This is usually via the sale of the property used for security or by refinancing the loan with another lender
• Borrowers Experience - The more experience a borrower has, the higher the chance the borrower will be able to repay the loan, and therefore the lower the probability of loss
• Loan Term - The longer the loan the more susceptible the value of the security is to changing market conditions. For example, a fall in property prices, a change in the wider economic climate etc. The shorter the loan term, the lower probability of loss
• First Charge Lending / Second Charge Lending - A second charge loan has a higher LTV than a first charge loan. A lender retains more control as a first charge security holder rather than a second charge security holder. The probability of loss is higher for second charge loan than first charge loan

Development Loans

• Loan to Gross Development Value (LTGDV) - The value of the development loan measured against the future value of the security. For example, a development loan of £200,000 against a house that is undergoing a refurbishment and extension and with a Gross Development Value (GDV) of £500,000 would mean a 40% LTGDV. Note the GDV is the future value of the security not the present value of the security. The lower the LTGDV the lower the probability of loss
• Anticipated Time to Sell - The length of time it would take to sell the property used for security
• Proposed Exit - The borrower needs to have a clear and realistic plan to repay the loan. This is usually via the sale of the property used for security or by refinancing the loan with another lender
• The Borrower (Developer) experience - A borrower with an extensive track record of delivering successful developments would present a lower risk than a borrower with no track record
• Construction Complexity - The higher the construction complexity the higher the risk is the borrower will be unable to deliver the development in its entirety, to an acceptable standard, on time and on budget. The lower the complexity, the lower the probability of loss
• Development Profit on Costs - A development's profit on costs indicates the level of return a borrower can expect to achieve if the development is delivered in line with the projections. The higher the profit of costs the higher margin for error there is in terms of potential cost increases or a lower-than-expected GDV. The higher the profit on cost the lower the probability of loss
• Loan Term - The longer the loan the more susceptible the value of the security is to changing market conditions. For example, a fall in property prices, a change in the wider economic climate etc. The shorter the loan term, the lower probability of loss

Each loan is assigned a risk score A through to D.

Loans graded A have lower risk; loans graded D have a higher risk.

As conservative lenders, we only lend against loans that score A through to C.

As A graded loans are less risky, the interest rate for these loans is lower than the B and C graded loans.

Below are the rates for each of the products and risk grades:

Premium Account

A grade loan    B grade loan     C grade loan

 5.40%               5.50%                5.70%