Bridging & Commercial Supplement — 2021 Market Outlook

2021 Market Outlook

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Welcome to the Bridging & Commercial Magazine 2021 Market Outlook, in association with Market Financial Solutions

Contents 4-7

8-9

MFS Market Research results Q1 2021 / Coverage from our virtual roundtable on the Budget and investors’ changing attitudes to alternative finance Case studies

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Market Financial Solutions

INVESTORS AND THEIR FINANCIAL SERVICES PROVIDERS

MFS MARKET RESEARCH RESULTS, Q1 2021 Key findings: » 34% of investors have changed the

qualities they now look for in a lender as a result of the pandemic.

» 40% of investors feel that banks are

taking longer to respond to requests since the beginning of the pandemic.

» Some 65% of investors fear Covid-19 has made banks over reliant on technology when providing customer services.

» 61% of investors feel they lack sufficient knowledge of alternative finance products to consider using them.

On 23rd March, Bridging & Commercial and MFS hosted a virtual roundtable on the topic of ‘Reacting to the Budget and investors’ changing attitudes to alternative finance’.

The live event was moderated by Beth Fisher, editor at Medianett, along with MFS’s executive director Tiba Raja and business development manager Imogen Williams.

The panel also included Jason Caprioli, lending director at Kingswood Associates; Mathew Phillips, finance broker at Clifton Private Finance; Piragash Sivanesan, founder at Totum Finance; and Nick Mayhew, director at Peak Business Finance.

On the subject of the extension of the stamp duty holiday announced in the Budget earlier this month, Mathew claimed that the main stumbling block for completing before the SDLT deadline is around solicitors being “inundated” with work across residential mortgages, BTL, commercial and bridging.

Piragash agreed that legals were delayed, but emphasised that, from the client’s perspective, it will generally boil down to an issue with the lender.

“If the solicitors are delaying things, we don’t want the excuse of, ‘It’s the solicitors,’ because, as far the client’s concerned, it is the lender.

“Really, we and the client hold very little power; the [one] that’s really in control and is actually paying the thirdparty professionals is the lender.

“It’s so important for them to realise that it’s their reputation [on the line] when a

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Market Financial Solutions

65 61% %

40 34 %

of investors have changed the qualities they now look for in a lender as a result of the pandemic

%

Some 65% of investors fear Covid-19 has made banks over reliant on technology when providing customer services

61% of investors feel they lack sufficient knowledge of alternative finance products to consider using them

40% of investors feel that banks are taking longer to respond to requests since the beginning of the pandemic

The market research was carried out between 15th and 20th January 2021 among 2,008 UK adults via an online survey by independent market research agency Opinium. Opinium is a member of the Market Research Society (MRS) Company Partner Service, whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The data sample of 2,008 UK adults is fully nationally representative. This means the sample is weighted to ONS criteria so that the gender, age, social grade, region and city of the respondents corresponds to the UK population as a whole. Within this sample, 975 respondents had investment portfolios worth in excess of £10,000 – this includes all assets from bonds and currencies to commodities and stocks and shares but excludes any property that is used as their primary residency.

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Market Financial Solutions solicitor or valuer doesn’t deliver,” he added.

When a member of the audience asked whether a client who takes out a bridging loan to meet the SDLT deadline would need to wait six months after the purchase to avoid it being classed as a one-day remortgage, Jason responded: “A lot of specialist mortgage lenders don’t buy into that sixmonth restriction.” He said that the biggest challenge was assessing whether the cost of the bridging loan outweighs the cost of the stamp duty that would otherwise be paid.

“It’s a case of having a good broker going through all the calculations and actually working out if there’s a real value there [that warrants] going through that process.”

Imogen added that, with certain lenders, it can sometimes take three to six months to arrange a term mortgage, anyway.

Chancellor Rishi Sunak also revealed the launch of the mortgage guarantee, offering lenders government assurance when providing 95% mortgages. Jason said that, once finance providers have got their heads around it and it filters through, he is excited to see how this scheme plays out.

“This 95% support is going to be the step that allows people to trade,” he said, explaining that it could help with the tart and turn approach to property development.

Imogen stipulated that this creates a stronger element of certainty around exits. “Certainly, there’s going to be more people in the market for our investors, should their exit be sale.

“In addition, I would hope it would stimulate competition, particularly in the first and second-time buyer market, which will [optimistically] have a positive effect on house prices, all of which will feed into MFS’s appetite in the market for bridging.”

Piragash feels that the government’s 95% mortgage guarantee initiative is the biggest gimmick of them all. “I would have much rather seen Help to Buy expanded and maybe allowing private companies to enter and start putting equity in to enable people to afford things going forward,” he remarked.

For the second half of the discussion, the panellists dissected MFS’s latest quarterly property investment survey, which found that 34% of investors have 6

changed the qualities they look for in a lender as a result of the pandemic.

Mathew thinks that the top three attributes are certainty, good communication and flexibility. Jason agreed, highlighting that open dialogue was “key”.

Tiba added that deliverability is also on the list of primary requirements. “Over the past year, something we’ve learnt is that a lot of lenders will say ‘yes’ because they want to do it; they have the flexibility but, along the way, they slightly change the goalposts or they don’t have the money that they think they have,” she explained. “It’s important to have people that are reliable, know what they’re doing, and understand the bridging market well.”

Market Financial Solutions

Imogen added that, with MFS having eight funding lines, it means that if something crops up during the valuation or legal stage, it can still often get the deal funded. “If you have lenders that are very much tied to their covenants [with fewer funding lines], it means that they aren’t able to have the same flexibility that we have.”

She pointed out that this is important currently, as the health crisis has increased the complexity of everyone’s situation.

The MFS research also found that some 65% of property investors fear that the pandemic has made banks overly reliant on technology when providing customer service. Considering there has been an influx of tech and automation in the bridging

market in recent times, the panellists were asked whether there is a risk the same thing will happen in the specialist arena.

Nick brings up the significance of product market fit, and feels that the issue with banks is that the tech they have built doesn’t really serve the customers or the institutions.

He notes that bridging lenders, typically run by younger, more tech-orientated people, “have a better opportunity to build technology that actually works”.

“As long as bridging lenders are keeping the broker and, ultimately, the borrower, at the centre of the tech they’re trying to build, overrelying on tech can only be a good thing.”

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Market Financial Solutions

CASE STUDIES study 1

Fast £3m refinance on a large Manor House in Kent due to council delays

Type: Residential LTV: 60% Gross Loan: £3m Charge: 1st charge

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Market Financial Solutions

Initial circumstances The client had purchased a large manor house in Kent that they were looking to repurpose into a number of apartments. The initial planning application had been delayed due to being rejected by the council and the client approached us directly when they needed more time to renovate their property.

The client subsequently had good conversations with the council following the initial planning rejection, and has now submitted revised plans, which they are confident will be approved.

MFS solutions We were happy to look at this refinance due, in part, to the experience of this particular client. They are a seasoned property developer and have successfully delivered on a number of projects like this in the past.

We received this enquiry on a Thursday evening and jumped into action – sending out terms later that evening.

The borrower then agreed and paid their fees on the Friday. At the same time, we were instructing solicitors and already receiving the valuation report.

Over the weekend, in partnership with the client’s solicitors, we worked to get the specifics in place.

The benefits The funds were released to the client on the Tuesday, just two working days after receiving the enquiry. The client now has the time they need to get the revised planning application approved, and then repay our bridging loan with development finance.

We were really glad to be working with such an experienced property investor, and they were very happy with the fit-for-purpose finance in such a short time frame.

We look forward to working with them again on their future projects.

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Market Financial Solutions

study 2

MFS Lends £2.9m for a commercial acquisition in Surrey

Gross Loan: £2,800,000 Type: Commercial LTV: 70% Initial circumstances The case was brought to our attention by a broker in need of a lender that could deploy a large bridging loan within days. Their client was in the process of buying a commercial property but risked missing the pre-arranged deadline due to delays from their existing lender, which would have resulted in them losing their deposit.

MFS solutions We were able to arrange a valuation report within 48 hours of receiving the case, with the bridging loan successfully deployed three days later. Simple, quick, and with zero fuss.

Paresh Raja, CEO of MFS: “At the beginning of the year, MFS successfully secured two funding lines totalling £350 million. Since then, we have been inundated with enquiries from residential and commercial clients in need of fast, tailored bridging loans.

“This latest case is an example of how MFS works with clients to meet deadlines despite the challenges posed by social distancing restrictions. Through the team’s dedication and experience, MFS worked around the clock to meet the needs of the client.”

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CONTACT US Contact us today to arrange your fast, bespoke bridging loan: Paresh Raja CEO

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Scott Lord

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Richard D’Souza

Senior Underwriting Manager

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