LendInvest has today (30th May) announced the sale of a portfolio of BTL residential mortgages to Chetwood Financial Limited for a cash consideration of £243m, inclusive of the proceeds from cancelled interest rate derivatives.
The portfolio comprises mortgages originated from 1st March 2022 to 30th November 2022 — within this timeframe, there was a substantial rise in overnight indexed swap rates due to increases made to the base rate, which rose from 0.5% to 3%, thus negatively affecting the profitability of these mortgages.
The proceeds from the transaction will be used to repay the facilities that financed the assets, which will allow the capital to be redeployed to originate new mortgages with stronger margins.
The book value of the portfolio as of 26th May 2023 was around £250m, and as such, a net pre-tax loss on the sale of the portfolio and the cancellation of the related derivatives is estimated to be around £10.5m (subject to audit) — this will be recognised through the P&L in the year ending 31st March 2024.
This largely offsets the net pre-tax profit of £10.8m generated from the sale of residual economic interest announced on 19th April 2023, leaving the P&L impact marginally positive.
Following completion of the transaction, LendInvest will continue to manage and service the portfolio on behalf of Chetwood Financial Limited.
Commenting on the transaction, Rod Lockhart, CEO at LendInvest (pictured above), said: "This transaction demonstrates our proactive approach to capital management and supports our longer-term strategy to manage an increasing proportion of platform assets for third parties.
“It also initiates a new partnership, adding to a growing list of global financial institutions choosing to back our mortgage products.”
