In this episode of the Mortgage Strategy podcast, host Kimberley Dondo sits down with Islay Robinson, CEO of Enness Global, to delve into the world of super prime lending. Islay explains what sets super prime lending apart from traditional mortgages and shares his journey into the high-net-worth finance sector. They discuss the evolution and current trends of the UK’s super prime market, the challenges brought by the recent economic climate, and the intricate details of underwriting and risk assessment for ultra-wealthy clients. Islay also offers valuable advice for mortgage advisors keen to venture into this niche. Tune in now:
Mortgage Strategy Podcast
Unlocking the World of Super Prime Lending with Islay Robinson
[MUSIC PLAYING] Welcome to the Mortgage Strategy podcast, your ultimate destination for staying ahead in the ever-changing realm of mortgages and real estate financing. Join us as we unravel expert insights, trends, and developments shaping the mortgage industry today, whether you're a seasoned pro or a new to the game, get ready to navigate the world of mortgage strategies like never before. Hello, and welcome to the Mortgage Strategy podcast. I'm Kimberly Dondo. And in today's episode, I'm joined by Isla Robinson, CEO at Ennis Global. Thank you for joining me today, Isla. Good morning. Nice to meet you. So could you give us a bit of a background into yourself and how you got started in the industry? Yeah, so my name is Isla Robinson, or Islay, if you don't know me very well, or Islay, you don't know me. I definitely watched a video for reference. That was my hack, yeah. It's an unusual name. I was born on an island in Scotland called Isla, and then I moved to London, and no one ever heard of it. And there's two little girls in one of my daughter's classes called Isla as well, so it's pretty confusing, right? But where I came from, it's a boy's name, and it's a movie. So I'm the CEO and founder of Ennis. We started the business 17 and a bit years ago. And that's my day job. Yeah, great. So to set the stage, could you briefly explain what super prime lending is and how it differs from the traditional mortgage process? So super prime suggests big values, big numbers, is really what it is, OK? So prime central London, super prime property is 10 million property values and upwards. One of our main marketplaces is helping people finance super prime property, so super prime mortgages. So anything kind of five, 10, 15 million pounds upwards. OK, great. And what specifically sparked your interest in specializing in finance solutions for high net worth individuals, particularly in super prime lending? Yeah, so when we started the business Ennis in 2007, we came out of Alexander Hall. And Alexander Hall is a fantastic business. It focused on UK residents financing UK property fed through the Foxlands network. So it's a super training ground. And lots of the kind of key people in the industry came through that room. My role at Alexander Hall at that time was helping non-residents, entrepreneurs, high net worth people finance their property. The vast majority of mortgage lending in the UK happens off of mortgage-brain or tri-gold if that still exists. So that's the sourcing system, which 90% of the mortgage industry use these to find solutions. When we set up, we focused on finding lenders that weren't on that database. So international lenders, private banks, bridging finance, which is kind of in its indefency back then, to solve solutions for people that weren't UK-based, PAYE buying its 75% loan to value. So if you were a high net worth American or Chinese or a middle east, wherever, if your income didn't come from a PAYE slip and a P60, if you were wealthy or didn't have income, or if you just had other complicated circumstances. So we started doing that in Alexander Hall back in 2007. We saw the opportunity. We set up NS to focus on that demographic. So that was when the global financial crisis was starting. And I guess to our fortune, maybe that's the right word. Maybe that's not the right word. The whole lending market fell apart. Lenders in the mainstream stopped lending. But we knew lots of other lenders that could help. And that's really what we built the business on. Yeah. Well, it was probably two or 14. Some bad things won't happen. But it can also benefit other people. Yeah, that's it. Yeah. So looking back, how has the super prime lending landscape evolved in the UK over the past decade? Are there any key milestones or shifts that you have observed? I think it changes in so far as the lenders change. So 10 years ago, there was a bank aid that would have this type of structure to attract wealthy individuals. And the lenders have just changed year on year through. So there's still some standard guys that everyone knows about, invest their concutes, great lenders. And we do a fair bit with it is the lenders that will lend. Tax has changed an awful lot for international people, how people make their monies changed an awful lot over 10 years with the advent of crypto and online businesses and international income sources where people live. It's kind of changed quite a lot. So COVID helps people realize that they could live anywhere. And with kind of golden visas and the kind of international passporting system, how do worth people are increasingly mobile of where they choose to live and where they choose to own their properties? So it's all of those kind of constant changing landscapes. But the fundamental is the same. Wealthy people choose to borrow to buy a house. People like you and I, Kimberly, we've got no choice but to borrow to buy a house, right? We've got this much, 5%, 10%, 15%. And we need the other 85, 90% to buy the house. That's how the vast majority of people operate. Wealthy people choose to use a mortgage. And that choice is if I use a mortgage, I get particular advantages based on my tax or my international structure. Or if I use a mortgage, I don't have to take the money out of my company. Or if I take a mortgage, I don't need to liquidate my holdings in stocks and shares or anything else. Or if I take a mortgage, I still retain my liquidity to do other entrepreneurial things with. So a mortgage for the very wealthy people is a financial tool and it's an option. Yeah, yeah, that makes sense. That was a long sentence, wasn't it? No, no, yeah, it was good. I think it makes sense because I think having read up more on why people who might be seen as high net worth choose to get mortgages, it makes sense. Some of them aren't liquid, like you said. So they might choose that path. But what are some current trends shaping the super prime lending market? Are there any specific challenges or opportunities that stand out? I mean, the first challenge is interest rates. So when you talk about using a mortgage as a product, as a financial tool, as part of your whole landscape, interest rates play a part of it. So when we had the base rate close to zero and mortgage rates at 1% and 2%, using a mortgage for IHT planning makes sense. It makes less sense now, subject to what we see in the budget in a couple of weeks time. If you're borrowing at 1% or 2%, and you can get a return on your money at 7, 8, 9%, taking a mortgage makes sense. But if your mortgage costs 4, 5, 6%, and your return is still 6, 7, 8%, after tax, you don't get the same arbitrage through the middle. So at the moment, we're seeing that very wealthy people in the whole are not using mortgage finance as much. Where we are doing an awful lot of lending for wealthy people is restructuring their affairs. So coming to the end of the term, off of your Barclays 1% five-year fixed rate onto something else, there is a big change at the moment. So how are we restructuring the mortgage? We're looking at their international assets. We're looking at their businesses. We're looking at their liquid assets and their single stocks and their investment portfolios and so on to find a solution. So it's a different marketplace at the moment than lots of wealthy people buying property with a mortgage. Lots of wealthy people are buying property, but just not as much at the moment with a mortgage until interest rates start to settle a bit. Right. And you have previously mentioned that there are many intricacies associated with super prime lending. So can you elaborate on some of the key complexities that mortgage advisors need to be aware of? Yeah, our first, so if someone calls us and let's say for example, they are a US national buying in London for 10 million and they won't find a million prime mortgage or Middle East or anywhere else on earth. The first part is not what is the interest rate that we can get or even the loan to value. The first question is always how do you own the property? Do you own it in your personal name or through a company or through a trust? And that's just as important when we're refinancing as purchasing and off the back of that, how are you set up on a tax basis for this? Is moving the money from overseas to London or into the Channel Islands, how effective is that? So I'm always amazed that the world's wealthy people don't check out these questions first. So our first job is always let's get the fundamentals of how the transaction is going to work in order first, structure, tax planning, where the money is moving from. And then once we know that bit, then we base the mortgage on those foundations. So the mortgage is a secondary thing. The mortgage for an international person, as I've said, it's really unlikely that someone calls us and says, "I've employed a JP Morgan on £3 million a year. "I want to buy a house in Mayfair "and borrow £4 million." The reason that's unusual for us is if you're that customer, it's really easy to get a mortgage. JP Morgan or every other bank that you know will give them a mortgage. Where we come into the market and into our own is when the individual doesn't have a job, or owns a business or sold their business and have tens of millions of pounds in a portfolio or other products, or whether they have big family wealth and that's how it's worked or their income comes from a trust. So it's all of these less than usual situations that we get involved in. Then it's our job to then find the lender and there are a huge number of lenders that will lend to wealthy individuals who are not based in the UK that don't appear on mortgage growing in a tri-gold. And those are the lenders that we're working with. And it's a case of understanding the individual's entire financial position. How do they make their money? Or they invested in? What does their asset base look like? What are their global liabilities? What other assets do they have? And we take that understanding to a bank and we effectively, individually, negotiate the terms. Still within a range, most of the international banks still have their product sheets and their lending guides, but loan to value, how their asset income, all of those things are individually undertaken. - Yeah, and let me know if you might be end up repeating yourself with this question, but what are some of the unique underwriting criteria and risk assessment factors that lenders consider when evaluating super prime loan applications? - They're the same but different. Serviceability is, we're all used to affordability with Santander and Barclays, right? Mortgage is X, monthly payment is Y, is your income in excess of that? For super prime mortgages, it's the same, but goes a bit further. Are your inflows or your potential inflows sufficient to cover the mortgage costs? But the inflows look at international net profit, cash burn off of investment. So if you've got a 10 million pound portfolio with a Swiss private bank, how much is your return off of that portfolio? And is that enough to cover the mortgage? Are your assets a level that it makes sense to give that person a mortgage rather than just looking at that affordability factor? So it's just a wider analysis of financial circumstances. There are also some kind of interesting rules. So some banks offer, again, regulated mortgages, right? If you're going to live in the house, that's a regulated mortgage. Now there is an exemption to that for high net worth individuals. So if your assets are worth more than three million, or your income is more than 300,000, the lenders don't have to apply that affordability testing as stringently. And then there's one which is even further still, if you're a wealthy international person buying an property in the UK, which you will live in occasionally, but not let. So just a home in the UK, then that can be unregulated. So there doesn't need to be the same level of investigation onto income and outgoings. So those are some of the differences and some of the criteria reports that exist. - Yeah. And how do super prime lenders approach issues like complex income structures, international assets and unique property types? - Yeah, so the first two are kind of, that's all individually. So the lenders will look at the individual circumstances and make a decision based off of that. Unusual property, the rules are pretty much the same. If it's suitable security is habitable, then it works. If it's a converted house, a converted church in the middle of nowhere with a hole in the roof, do you know, probably not? - Probably not. - Yeah. - I think the same thing. - Yeah, I can imagine there's quite a risk sometimes with high net worth individuals because like you're saying they look at whether they have enough to pay with their assets. But if something were to go horribly wrong, is that taken into account in the risk assessment? - Yeah, I think that, you know, how the individual, so it's kind of similar to bridge environment. So how is this loan going to be repaid in the future? - Yeah. - It's always kind of looked at and, but these structures are, you know, if someone's got X million in a portfolio or they've got carried interest from their private equity fund or they've got hundreds of millions of pounds of real estate around the world, then it's quite difficult for things to go wrong with that. - Yeah. - I don't imagine I don't know. - Yeah, you hope, you would hope. That's what they tell us, so yeah. So looking ahead, what are your predictions for the future of super prime lending in the UK? Are there any emerging trends or potential disruptions on the horizon? I know that you talked a little bit about the budget, but we can't speculate too much. - That's it, the budget is the key thing, right? So, you know, all the London super prime agents are just waiting for the budget. And what is it, 13th of October? So it's 23 days away. - Yeah. - And everyone is on the countdown for that. The countdown is at the moment, we don't know what the rules are gonna be in 24 days time. So at the moment, no one is prepared to make a decision or take a big investment without knowing what those rules are. My approach to this, you know, 20 years we've been doing this now and we've seen stamp duty and budget changes and non-done changes and all of these things for all of this period. My view is the budget happens. Everyone then knows what the rules are, then everyone then sets their plans against those rules. So it's just the certainty that everyone's waiting for. So I think after the budget, the rules are clear and either some wealthy people are gonna leave London and that's that will happen or the budget won't be as bad as everyone's expecting. So not as many people will leave London, but the flip side is how will the rules change for people that aren't in the UK? So will it be a more advantageous position for American buyers to come into London or any other nationality? So the budget gives certainty. The Andrew Bailey, the governor of the Bank of England last week said he's expecting that the base rate is probably gonna come down a bit faster the more he was predicting a few weeks or months ago. So the base rate moving down quicker is going to stimulate more lending. The budget is gonna make the playing field known so people are gonna know what they're going into. So I think those two things just move everything forward again and kind of restart the next cycle, it could be wrong. It could be a disaster, we could be out of jobs, more of a strategy becomes, you know, requisition strategy, who knows? But let's see what happens. I just think that the anticipation of change is never as bad as the action. - No, yeah, I don't like the sound of repossession strategy. - I'm gonna go buy the domain name now. You can be applauding one. - Okay then, thank you. But what advice would you give to mortgage advisors who are looking to expand their services into super prime lending? Are there any essential skills or knowledge they should acquire? - No, I think it's just, you know, it's just dealing with the customers that you have in as full away as possible. So we see, it's really easy for a customer to call you and you get the bare minimum information and then you load it into a sourcing system and say, your fixed rates this, your variable rates that, your five year fixed rates this, you can borrow roughly this number, what do you want to do? That's super easy, okay? And we're seeing an increasing number of brokers just do that, charge as small a fee as possible to win the business and I'll figure. Lots of people do very, very well off of that and it's fine, absolutely. But to expand, the simple change is just to learn more about your customer. Where did they make their money? What are their plans? Who are their advisors? And so on and so forth. And when you meet someone who is entrepreneurial or comes from overseas, just build out your understanding and become more involved in the process and understand their background. And that might lead into different opportunities. So I always give reference to a couple of cases that we did when we started. One was a guy called Scott. He called me, he just sat up a marketing agency. We were working off of his net profit and his direct as loan account and we managed to get him 300,000 pounds to buy his first house in Hackney. Four years ago, he sold his business for 100 million pounds. And we stayed in touch and we helped him as his business expanded and went through all those different things and we brought in some other ideas. And now that's a very wealthy customer that we did an eight million pound mortgage for the year before last, someone else, Nick. Again, he had a flat in, I don't know, Vauxhall or someone. He didn't have a job. We did a mortgage express mortgage for him, a couple of hundred thousand pounds. Fast forward, eight years later, he sold his business for a mind-boggling mind of money. And since then, we've helped him with financing a Monaco property. We've done some loans against his securities. He called me to ask about how to finance his island and the Bahamas they were buying. And unfortunately, I didn't get that piece of work. But those two stories are only available because they called, we invested the time, we learn about as much of that person's world as possible. We solved the solution, we kept working with them and over a period of time everyone will see these customers. - Yeah. - If you don't see these customers, then it's all your marketing team, man. - Yeah. - That's another thing to do. - Yeah. - Nice to meet you all. - Yeah, definitely. I think we always hop on at mortgage strategy about how your connection to your clients is your biggest piece of your business and the longevity of your business. So that makes sense. - That's it. - That's up, LinkedIn, stay in contact, send them a birthday card, check in with them every year, what's going on. And you will see, you will absolutely see people given how entrepreneurial the UK is that takes a startup to a 20, 50, 80 million pound exit. And those are great clients to come and focus on. - Yeah. And finally, is there anything else you'd like to share with our listeners about super prime lending or the broader financial landscape for high net worth individuals? - No, I don't think so, really. I don't think I think I've said quite a lot today. - Yeah, you have. You've shared everything. Although I am quite interested in the process of purchasing an island. I don't know if I'll ever reach that, but I... - Let me explain that. I mean, you can buy islands off of kind of yard of weight for 50 quits, so maybe, you know, maybe you'll pick up something like that. Yeah, so maybe that's a good answer to your previous questions, but there is a lender for everything is our expectation. So our lender book, we never really counted, but it must be four or 500 lenders. Once you include all of the bridge lenders, the international private banks, the international lenders, and everything else, there's hundreds, right? Commercial and corporate insecurities. So when someone calls and says, I'm thinking about doing this, there will be a lender for it. We had a call earlier in the year from someone that wanted to borrow four million pounds against their blood stock. And our stock answer is, yeah, we can help with that. Give us a day. Then we put the phone down to Google blood stock. What is it? Yeah, it's horsies. Who knew, okay? So all of a sudden we, by saying, let me see if I can help, and then researching the lenders, we found some money for a blood stock loan. It ended up to be a private loan from a high net worth individual that landed against the company, which owned the blood stocks. But there are, just by researching, you can find lenders and Google help. Yeah, wow. I just learned something new. I definitely was like, does he own a blood bank? Yeah, that's it. I know. I know. Halloween's coming in. Right, but yeah, thank you so much for speaking with me today, Ayla. This is a really interesting conversation. You're welcome. Thank you for tuning into another insightful episode of the mortgage strategy podcast, we hope today's discussion has armed you with valuable insights to enhance your mortgage decisions. 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