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The new normal A closer look at how the coronavirus crisis has changed the market
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What a diﬀerence a month can make
et’s be honest none of us expected 2020 to turn out like this. The year started out promising and Brexit uncertainty was finally at an end. Now the bridging market, and the whole country, finds itself facing a whole new set of challenges. With the UK in lockdown the sector is having to adapt to a whole new way of operating. With property surveys now out of the questions many lenders have been forced to cap loan-tovalues or in some cases cease lending altogether. To be honest this is not unexpected. It’s a prudent move for now. However, it is disappointing to hear of situations where lenders are cancelling deals in their pipelines that are ready for completion. Every business is diﬀerent and clearly some lenders will have been forced in to a corner which left them no option but to abandon deals. Right now the most important thing is to keep communication open with borrowers, brokers and stakeholders. Everyone is in the same boat and honesty is one of the things that will be remembered when we come out of the current crisis. And we will come out of the current crisis. It’s worth remembering that the specialist finance market was built in times of adversity. This is a market that flourishes when other lenders retreat. The appetite of banks in the short-term will remain to be seen. Specialists can help get the market, and indeed the economy, moving again. Until then we’ll continue to keep you up to date with what’s happening in the market. Stay safe. B I
Contents 5 Bret Jackson Just remember... this will not last forever 7 Kevin Thomson There is still business out there to be done 9 Harry Hodell Everybody’s got a plan until they get punched in the face 11 Jonathan Newman You don’t have to look too far ahead to find reasons for hope 12 Tom Pritchard A look at lending in lockdown 14 The new normal Jake Carter looks at the changing working practices of the specialist market in this time of change 25 Vic Jannells The latest from the Association of Short Term Lenders 26 Alan Dring A parting message from industry stalwart Alan Dring
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This will not last forever Bret Jackson Xxxxxxxxxx
head of marketing & xxxxxxxxxxxxxxxx, communications, xxxxxxxxxxxxxxxx BWD
e have entered a period of unknown. An unforeseen crisis that none of us thought we would see in our lifetime. I certainly never envisaged I would be queuing to enter a supermarket for my weekly groceries, conducting meetings online, having a glass of wine with my friends via video call/WhatsApp, rather than the pub. Luckily, ourselves and many other individuals from businesses I have spoken to, are prepared for events like this, with the investment in technology. With so much now conducted online, people can access much of what they require from anywhere. TECH FOR BUSINESS
As an organisation, we invested in a new CRM and a new phone system which is cloud based, enabling the majority of employees the essential tools they require to conduct their day to day work. Throw in VPN, Microsoft Teams and Skype and we are all set. I am impressed with the positive vibes and messages of support on social media, in particularly LinkedIn. But one phrase has narked me a little and that is ‘business as usual/normal here’. Come on, let’s have a reality check. It is not business as normal. Business is still being conducted and people are getting on best they can, but it certainly is not normal. Talk of deals still being conducted, firms still lending etc is excellent to see. It was inevitable that products would be pulled, freeze on new business from some lenders, but these are temporary controls to mitigate any future issues, but further emphasises that is not business as usual. From a recruitment perspective, this is certainly a tough time, but www.sfintroducer.com
having said that, some of our clients are looking at this as an opportunity. Yes, certain oﬀers have been pulled and roles on hold, but some forwardthinking firms who are currently in a period of growth, are looking to secure talent now, ready for when the pandemic passes. Oﬀers issued, contracts accepted etc, just the start date to be confirmed. How employers treat their employees during this period, is also crucial of how they will feel at the end. If they do not feel safe, the lack of communication and guidance, they will also be thinking of their future. Our consultants are
“The one concern I have are bridging and development agreements coming to an end during this period” having these conversations, but that was inevitable. People react diﬀerently in times of crises and this is no diﬀerent. Before the Coronavirus took hold, we had seen an increase in risk specialists, especially within the lending sector. The requirements of the roles are very similar, but this upturn was pretty rapid. A Challenger Bank have approached us to provide a new division of risk specialists. Work is still ongoing for these roles but will be concluded once we are heading towards normality. Not sure if the increase is regulatory or industry driven, but either way, it is a good thing, especially as we can assist. These are unprecedent times, but I have to say the government have been fantastic in their support for businesses, large and small. Whilst I was writing this article, I had been notified by friends and industry people who have been furloughed. In essence, these people are going into paid hibernation, until this all clears up. Many of these individuals would have been made redundant, but the government have certainly up the ante. The other incentives with mortgage
holidays, fees on overdrafts removed, business rates, VAT deferral etc has been excellent, with some unexpected. The self-employed have finally been provided some reassurances that they will receive support from the government. Often overlooked, but this time round has been included in measures. The one concern I have are bridging and development agreements coming to an end during this period. Some of the comments I have seen do look very positive, but it could be diﬃcult for some to exit during this time, complete sales, therefore borrowers could incur further costs. As already stated, I believe that the majority of lenders will take into consideration what is happening, therefore will just extend the terms of the existing agreement. It is times like this the industry supports needs each other. Do not disrespect other lenders or banks during this stressful time, it does not do you any favours. Being open for new business is a huge plus at this moment in time, but brokers, advisers and other lenders need to be aware. Nobody can predict when this will end, but I am sure once it is all over, we will popping into our local for a pint or two, going to our favourite restaurants, getting business back on track and things should be coming back to normal. B I
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There is still business to be done Kevin Thomson Xxxxxxxxxx
sales director, xxxxxxxxxxxxxxxx, Connect for Intermediaries xxxxxxxxxxxxxxxx
lthough it’s too early to say how widespread the coronavirus will become or how long the pandemic will last, it’s clear the disease’s economic impact will be considerable. The tighter restrictions on the movement of people in the UK has the obvious knock on effects for businesses as consumer demand drops significantly and even when the demand is there many businesses are not in a position to meet it, the ban on house moves being a case in point. The UK government announced a series of measures aimed at helping businesses cope with the impact of COVID-19. The Bank of England also announced two well-published cuts in the base rate to just 0.1% as well as a sharp increase in the supply of credit to the country’s banking system. The impact will affect every sector, however there is still business to be done, and it is never too early to start planning for coming out the other side. In the short term, brokers need to be aware of the options open to their clients who can no longer access traditional forms of finance. While we know that there are a number of sectors that will be very adversely affected, there are others on which we all depend and these will help to keep some aspects of the economy going, even as others are forced to pause. Food and drink for example are vital. The food and drink supply chain has to remain open during this period even if imported foods from other “affected countries” become restricted. While much manufacturing may well be compromised, especially where component parts are sourced from international countries, there are other manufacturers who are essential www.sfintroducer.com
and others that are already seizing opportunity – and the opportunity to do good at that. The recent announcement of consortium comprising UCL university, McLaren F1, BAE Systems, Airbus, Thales, Ford, Renishaw, RollsRoyce and Smiths coming together to build ventilators is a perfect example of companies coming together to help the country. In addition, Ineos built two factories within ten days to deliver one million bottles of hand sanitisers a week for hospital trusts, proving just what can be done when companies really focus on opportunities.
“Businesses will be looking for those who can provide leadership; helping and supporting them through this period” In doing this they not only help the country to survive this crisis but help to keep people working and the economy moving. While there are other sectors who cannot adapt in this way there are always opportunities irrespective of the overarching economic situation. The way we work has already changed beyond recognition in just a few weeks. BDMs and mortgage advisers, used to seeing people face-to-face are already embracing video call and conferencing in order to keep in touch with their clients. In tough times the norm may just not cut it and over the next few weeks more will become apparent about those who can adapt and those who can’t. Some lenders have adapted almost seamlessly to having all their workforce working from home. Others whose technology was not so good, are struggling. This coronavirus situation is clearly going to create a more technologically driven industry.
In the short to medium term, alternatives to existing lenders may be needed. The High Street lenders are likely to be overwhelmed with Interruption Loan applications and if you have a business client that just cannot wait then there is an immediate need to find alternatives. We know that getting a physical valuation is not feasible at the current time therefore getting to providers that can grant finance without the physical valuation is key. Unsecured business loans are an obvious area that every broker needs to be aware of as valuations are not generally needed. Yes, there are the Government interruption loans, and it is vital brokers understand their availability and how to access them, however not all SME’s will be eligible or will be able to successfully obtain such a loan. However, there are alternative funding solutions that many business owners are not aware of. Your client may have been turned down by their bank but can you assist with some alternative funding such as unsecured business loans, revolving credit facilities or invoice finance. SME’s will be concerned and worried for their businesses. They may be alone and apart from their own bank’s relationship manager, may have no one to turn to. They can no longer even get advice from the “mate in the pub”, so isn’t this the right time to become integral to their business? Businesses will be looking for those who can provide leadership; helping and supporting them through this period. This may well be the difference between them keeping trading or otherwise. Anything you can do now in building that stronger relationship is likely to reap rewards in the future, because while things may have changed beyond recognition in the past few weeks, this situation will not last forever and we all need to be in a position to pick up the pieces again on the other side. B I APRIL 2020 BRIDGING INTRODUCER
Coming back stronger Harry Hodell director, Pure Structured Finance
s once so eloquently put by Mike Tyson, the youngest ever heavyweight world champion boxer: “Everybody’s got a plan until they get punched in the face”. With the vast number of property professionals in the UK enjoying a bullish start to the year it would be a fair assumption that very few of us, if any, could have predicted the situation that we are now faced with. In these extraordinary times, the market faces a rather new challenge compared to the financial industries’ historic difficulties. In the aftermath of last December and the Brexit conclusion, the beginning of the year brought just about the closest resemblance to some sort of stability in the UK housing market, that we had seen in several months. The UK property market and its professionals were ready and waiting to make the most of the year ahead. HEALTHY START
Certainly from a personal perspective, I enjoyed the start of the years returning confidence to our sector, the increased volume of inquiries and transactions and the continued evolution of debt provider’s products. This seemed to be echoed across the country with Zoopla reporting its strongest January and February four years. But then you get punched in the face... Over these past few weeks, the global pandemic COVID 19 virus has brought forth many unforeseen challenges to our industry and indeed, the worldwide marketplace as a whole. Already there has been a dramatic decline across international markets and within the UK economy, so it comes as no surprise the property www.sfintroducer.com
market has felt the backlash of the developing situation. The very immediate response was somewhat disbelief and hope that the UK would not be affected in the same way our global neighbours had been. Sat here today with the nationwide lockdown on all non-essential travel and work has once again cascaded our industry with uncertainty. This has seen the majority of lenders reducing their offering and made the, I’m sure, the extremely difficult decision to decline all new applications whilst others have pulled out of new lending altogether. The construction industry has felt its biggest decline since the financial crisis and we are experiencing record high numbers for unemployment not matched since the 1970s. There is no doubt that the weeks and perhaps months ahead will be extremely challenging for a majority of those in this industry. Judging from the actions of countries at a later stage in the defence against Coronavirus, the lockdown review on April 13th will be extended until what looks like to be the end of the month, perhaps longer. At this moment there is some leniency for construction workers/ valuers, although it would seem likely that this will be tightened in the coming days. Whilst there are multiple implications of the virus and the government’s actions to prevent the
Time will bring a return of strength to the market
spread of it, we are also provided the opportunity, albeit challenging, for our alternative specialist lending industry to lay claim to its commercialisticthinking namesake. Though struck heavily by this pandemic, alternative finance has blossomed in previous struggles for the ability to recognise opportunities, adapt and provide truly unique lending offerings to the many clients who need it. I continue to work with specialist lenders who, like I, hold bullish long term views of the market and can offer bespoke solutions to clients. The ability for them to continue re-modelling their offering during uncertain times and provide clear parameters in which they can operate in installs the understanding and confidence of their ability to deliver. More so now than ever, the relationships between client, intermediaries, and lenders will be tested so it is good to see that the upmost is being done to attempt to keep all parties informed. TECH FOR BUSINESS
Out of necessity, the industry has had to rely upon technology to remain active, something I’m glad to see and hope we continue to embrace in the future, as it will hold the industry in good stead moving forward. Transparency and working together to problem-solve will provide the platform needed to thrive as more certain times present themselves. I am confident that once we have conquered this almighty foe that currently stands in front of us, we will have a bounce-back of the UK property industry and fulfill the backlog of increasing applications and opportunities like that, which was experienced in January/February this year. So despite the somewhat daunting challenge we currently find ourselves up against, we will remain agile and resilient and as time passes and confidence returns, we will come back stronger than before. B I APRIL 2020 BRIDGING INTRODUCER
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Looking ahead with hope Jonathan Newman senior partner, Brightstone Law
n times like this people are crying out for positive news and, when it comes to the future of the bridging market, I really don’t think you need to look too far ahead to find it. Don’t get me wrong, the shortterm will be a nightmare; and we will all need to accept that in the next few months cashflow will be down significantly, the property market will recede for most but not all properties, and restrictions will place diﬃcult hurdles in the way of transactions, which still make sense and where all parties are ready and willing. In the short-term, businesses that have taken a common sense approach, with sensible leadership, and are run profitably with cash reserves, are best set to ride the storm. Typically, they are well established, and with hard earned experience from two recessions in recent times. It is less good news for those businesses whose model has been built on rapid growth and high volumes; those building for a future which now, sadly, looks somewhat diﬀerent to recent expectation. But then think medium term and consider this. A period in time may be coming when appetite for short term finance delivered expertly and executed professionally may well be around that corner which seems so far away. What is bridging finance? It’s the provision of short-term finance to solve short term problems, and that need will be there. This is our raison d’etre. This likely recession will be diﬀerent to those before. Past recessions arose from underlying economic deficiencies, and poor unsustainable banking practices. This likely recession has no economic or poor practice cause whatsoever. It will have nothing to do www.mortgageintroducer.com
with underlying economic conditions. So as sharp as the decline is, so should be the bounce back because the fundamentals of mortgage lending will not have changed. Cash flow may be under intense pressure in the short-term, but this market has some advantages that other sectors do not enjoy, like assured future revenue from its existing books, secured in whole or, in a recessionary property market, for the most part. So those businesses that are in a strong enough position now to ride out the current storm, will reap rewards. After all, the high street, we know to be clunky, traditional and often handcuﬀed and it will be late to react to demand, so there’s great potential for the market. SUPPORT NETWORK
And do not disregard the importance of established professional relationships and friendships. In times of diﬃculty, friends step up and provide support. So many lenders, brokers, valuers and even lawyers(!) have become friends over the years. And even at this early stage in this exceptional environment, I have seen fee and costs forgiveness on loans which cannot proceed, through no fault of the borrowers. Why? Because stakeholders with established relationships care about borrowers,
their reputation, the reputation of the space, and each other. And there are additional reasons to be positive and additional opportunities arising. I think we could see a complete reset of the industry, with a return to traditional principles of lending. The market has complained amongst themselves about some practices which have been allowed to take root in a saturated market where competition was driven by volume – failure to price appropriately for risk, being just one – well everyone now understand better what risk means! So as we escape the crisis, which we must surely do, I predict a new environment and the opportunity to reset what we do and how we do it, address those concerns which have been voiced but not acted on, with a return to common sense-based lending and stakeholder relationship – a more sustainable environment for all of those strong and robust enough to remain. In many ways, I believe this return to basics will reflect a broader reset in society as a whole where people have suddenly discovered their need for toilet rolls outweighs their desire for Chanel handbags – and this more measured approach can’t be a bad thing. B I
A return to basics will reflect a broader reset in society
Lending in lockdown Tom Pritchard director, Charter HCP
s we are being told so often at present, we are in ‘uncharted territory’ both for the health of the nation and its economy. Normal rules of consumer behaviour, macroeconomics, finance and banking have been suspended as markets, governments and financial institutions try to get to grips with what is, at best, a severe economic shock and at worst, the start of a sustained period of a normality that is vastly diﬀerent from any that most major Western economies have faced in over 70 years. In such an environment, with such uncertainty, and with so much general fear, it would be unsurprising if the whole market ground to a halt. Indeed, early empirical evidence at this stage is showing signs of a general market slowdown that was already in place before COVID-19 became such an issue in Europe. Add to this the possibility of loan covenant breaches as the value of real estate declines as a result of pure uncertainty, issues of liquidity trap associated with interest rates that are at 0.1% as I write, huge sectors within real estate (such as leisure, hospitality and retail) that have almost no income at this time (and therefore no capacity for debt serviceablity) and the picture looks pretty grim. Who would want to lend in such an environment, and indeed, who would be foolish enough to want to borrow or leverage themselves up for any purpose at present?
been in place for them resulting from COVID-19 lasted for 12 weeks. Most of China is now back at work, and furthermore aggressively targeting new deals in energy and infrastructure. Assuming that the modelling extrapolates to Europe, it is to be hoped that the restrictions will last for 12 weeks here. Furthermore, there is significant evidence (from wartime economies or those that have recently experienced a significant natural disaster, for example) that recovery from such disruption, provided it is relatively temporary, tends to be very strong. People miss bars and movies, football, restaurants and buying new clothes for nights out a lot when they can’t have them, and as such will come flooding back as soon as the restrictions are eased. More practically, most typical development or project finance pieces will take a minimum of 12 weeks from inception to drawdown. As such, any deal that is started now should be in line for completion just around the time that the restrictions are eased so that demand comes back to the marketplace. There is still liquidity in the market, particularly in the alternative lender space that is under pressure to be deployed as the funders themselves have to avoid the standing facility fees that their credit lines will be under. Finally, there are undoubtedly going to be some good deals in the marketplace for anyone with enough
courage and nous to take them on at this stage of the game. When you combine this with the fact that both lenders and also consulting project finance agencies such as ourselves are going to be flexible on fees at this time, there is the potential to make an attractive package for anyone that is prepared to take the plunge at this time. Indeed, governments around the world taking the sort of stimulus measures that they are at present gives rise to the possibility that in 12 to 16 weeks’ time, as restrictions are eased, Europe and North America may be awash with cash, backed with historically low interest rates that Central Banks will be reluctant to raise. NOT ALL DOOM AND GLOOM
In such an environment, combined with the release of pent up demand, you would expect the world to unleash a frenzy of real estate activity, particularly if government support through the period ensures that commercial infrastructure (shops, bars, restaurants, hotels, airlines etc) remains intact. Our message, therefore, is that all is not as gloomy as it seems. Over this period, projects will be funded, some on extremely competitive terms, taking advantage of the uncertainty and delivering highly successful businesses as a result. In other words… If you have the courage, you can get the cash! B I
ON THE OTHER HAND…
There is some ready made evidence to suggest that, whilst uncharted, the situation is most likely to be finite. If we take China as the model, the (significant) restrictions that have
Any deal started now should be in line for completion just around the time that the restrictions are eased
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The new norm
rmal... As the market enters uncharted territory, Jake Carter considers how prepared it was for the changes forced upon it by the COVID-19 crisis
he coronavirus outbreak has had a profound impact on worldwide economies and industries; self-isolation measures imposed by the government mean that the crisis has also changed the way businesses are functioning, with an unprecedented number of employees working remotely, while working to fulfil the same objectives they would previously. Bridging Introducer takes a look at whether the specialist market is prepared for this change and considers if working from home could become the new normal, thanks to the advancements of modernday technology.
THE AGE OF TECHNOLOGY Lyndon Whitstance, sales director at Movin Legal, believes the question should not be how home working will affect the specialist market, but instead â†’ APRIL 2020
MARKET why it should. Whitstance outlines that in this age of broadband and cloud-based systems, it no longer matters where you are, as long as you have a computer and internet connection. A rise in specialist finance businesses using cloudbased systems and phone calls should lead to a seamless transition between working from the office to working remotely. “It is more about utilising different methods in order to continue to the same capacity,” Whitstance adds. “This could be by using systems such as Skype and WhatsApp in order to perform virtual meetings and replace face-to-face ones.” Adam Tyler, executive chairman of FIBA, also believes that the specialist industry must utilise technology in order to continuing working efficiently. He points to platforms such as Facetime, Zoom, Teams and Skype, which could enable the industry to continue to provide advice and make recommendations, albeit online. “This is a golden opportunity to work differently and examine new methods,” he adds. FIBA will be cooperating and working together with
product and service providers to offer webinars and other methods of online assistance to advisers and brokers to ensure that their services remain consistent throughout the crisis. Like Whitstance and Tyler, Andre Bartlett, director of Capital B Property Finance, emphasises that effective use of technology will lead to successful performance in spite of lockdown. Bartlett explains that Capital B invested in technology prior to the coronavirus pandemic which has meant that the business has continued to work effectively. Dale Jannels, managing director of Impact Specialist Finance, believes that the lockdown should not faze a savvy specialist packager or distributor. “None of us knew this COVID-19 issue was coming,” he says. “Whilst it has taken every aspect of our individual and corporate lives in new directions, technology and social media contact remain largely unaffected.” At Impact Specialist Finance, an online system has been available since before the pandemic and is accessible from anywhere in the world, 24/7. The system works in real time and is securely backed up in three UK locations, so if one were to drop, →
The future of work is changing Rameez Zafar CEO and co-founder, Eligible
he future of work may have just fundamentally changed forever. Companies across every industry around the world are coping with how to achieve ‘business as usual’ while working from home. Businesses are generally slow to adopt new technologies (typically taking two to three years); however, the global COVID-19 pandemic has forced the world to turn to technology to think about how to digitize tasks, automate processes and transition to new workplaces. Nevertheless, it still takes time to transition and get used to new ways of working, both for leaders and their teams. With change comes new challenges. What do you do when your business is programmed to meet clients face-to-face? How will you get a real-time view of your business remotely? How will you still generate revenue? The answer is that these things will be done in the same way they have always been done when the markets changed: by
BRIDGING INTRODUCER APRIL 2020
adapting, being open-minded to tech, and understanding the value it can deliver to process and operations, now more than ever. The starting point is to have good communication software that works for your business, but the benefit of technology isn’t just about virtual calls. I’d be surprised if you haven’t heard of Zoom by now, whether that’s ‘in the office’ or on the stock market. Most firms we’ve spoken to are using this tool for both internal and external meetings; indeed, it’s what we use ourselves. There are other video conferencing tools out there like Skype, GoToMeeting and MS Teams which are just as good — you’ve just got to see which one works best for you. You can use the screen share technology on these solutions to run through any documents and show presentations, just like you would if you could meet face-toface. Try Slack for internal activity, such as one-to-ones, video calls, quick messages and questions that don’t need to be an email. Setting up automations and autoresponders are good ways for you to nurture clients, capture and respond to queries when you’re not around or if you’re low on resources. More than 41% of consumers expect live chat on your website,
which is possible with tools such as Intercom. It’s a great way to connect in real-time. You need to be visible, ironically. Having visibility of your team and what they’re working on will help you identify opportunities to collaborate and save you from having to check up on them. The great thing about tech is that it encourages collaboration, especially in isolation. Using project management tools like Asana, Trello or Google Docs can help manage projects with multiple contributors and individual tasks, so you know what everyone’s up to. Team boards or checklists can keep you in check and you can sync as little or often as you need. We like to have a companywide weekly sync on Zoom and stand-ups throughout the week within teams on Slack. If you’re struggling, talk to someone; keep the communication going within teams and work together to make this transition work for everyone. Technology brings people together. I’m proud of the increasing number of new support initiatives on offer to businesses within our industry announced in recent weeks. Companies are coming together to support their customers, prospects, partners and even competitors.
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I N A S S O C I AT I O N W I T H
MARKET Impact would still retain live access and business would be unimpeded. The system also employs global sharing functions, allowing team members and separate departments to share file details with access to the latest information. As a result of this investment in technology, Jannels believes that Impact is able to continue working to near the same capacity as before the pandemic. However, like Tyler, Jannels stresses the importance of software such as Microsoft Teams, which allows businesses to share information and discuss any performance needs for the day. Daniel Richardson, a partner at Manchester-based CG&Co, which works with a number of bridging loan companies and lenders, has been utilising video conferencing platform Zoom to remain in full contact with clients, and social media to remain in touch with colleagues. Additionally, the firm’s office phone system is linked to company laptops and mobiles, so clients are instantly connected when ringing CG&Co’s head office. This investment in technology has resulted in CG&Co being able to continue work in an almost normal capacity according to Richardson, who explains that CG&Co has maximised its potential by taking the decision early to remain reactive and responsive by utilising the right technology. Chris Oatway, founder of LDN Finance, says that many firms in the financial services sector were already set up to be able to work remotely, which will benefit the industry as a whole. A key concern LDN Finance faced was in regards to the company’s switchboard and how it could continue to ensure calls were answered. However, investing in technologies allowed a seamless transition to mobile use from the usual landline phones. Feeling connected on a day-to-day basis is paramount according to Oatway, and through group chats and various communication platforms, connectivity remains in a time of crisis. HARDEST HIT Surveyors and valuers were agreed to be the area of the market most likely to be negatively affected by the impact of working from home and social distancing. Looking to valuers in particular, Bartlett expressed dismay at their ability to operate efficiently working from home. However, legals, lenders and business development managers are all also set to be adversely affected. Whitstance agrees that surveyors will suffer the most, as clients may be unwilling to let them into their homes, especially those who are considered high-risk. Similarly to brokers and estate agents, surveyors could utilise modern technology through ‘virtual tours’; this is one example of the specialist industry ‘weathering the storm’ and using innovation to keep to business as usual in a time of crisis, Whitstance
BRIDGING INTRODUCER APRIL 2020
explains. Continuing the trend, Jannels outlines the difficulties faced by valuers through being unable to travel or enter an applicant’s property during lockdown. He also points to the legal process, which is beset by the same circumstances. However, Jannels explains that difficulties faced during the legal processes are easier to overcome via social media and technology, through the use of which face-to-face contact can be successfully removed. Looking at it from a broker-client relationship perspective, Jannels believes that the regulator may have to accept that face-to-face meetings are now impossible, with important concepts such as ‘Know Your Customer’ being more reliant on paper and email exchanges than ever before. The lockdown is halting a major part of a business development manager’s day-to-day: face-to-face meetings. It is through social media and building relationships via online platforms that BDMs will be able to conquer this challenge, according to Whitstance. Lenders also face an increasingly difficult task. “Some have huge staff numbers and the banks amongst them will have the issue of servicing the savings account customers and maintaining security levels,” Bartlett says. “We are being told by most that funding lines are secure and that it is business as usual, but we are seeing news from some of the buy-to-let lenders, such as Barclays and Together, that suggests there will be some unfortunate victims in this crisis and that it is about to get much tougher before it gets easier.” As a result of this, Bartlett explains that lenders → www.sfintroducer.com
Stay Safe -----from With Hope Capital #HopeForTomorrow Watch this space!
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MARKET will tighten LTVs and criteria to adjust accordingly, and adds that honesty and communication are key to working through the lockdown. Capital B Property Finance plans to see lenders that have an Automated Valuation Model (AVM) system where possible, in an attempt to make things easier to process. Despite there being no meetings in the diary, LDN Finance has in fact been busier than usual. “The market has been turned on its head,” Oatway explains. “Lenders are reviewing every deal in their pipeline and assessing the way they have been structured and how the changing market is likely to impact their risk.” Through industry opinion, lenders must consider the position of their whole loan book whilst also underwriting the specific deal again. In addition, with several large lenders announcing they are stopping new business in order to focus on existing customers, workloads have increased for those that are still accepting new customers. DEMAND With the countrywide lockdown in full effect, and numerous firms announcing the closure of their lending books, what is happening to demand? Jannels outlines that the technically adept will have the ability to conduct most necessary safeguards, such as sanction searches, open banking and credit files. “There may be a major problem looming, however, and this might be in the domain of the lender,” he continues. “We have one lender [that] has advised that they will not take incoming broker calls. We have to email them and they will respond within seven days. “We have another [that] has advised that they will
only allow so much incoming business per day and that once that is achieved, brokers have to submit again the following day. “This is surely called a lottery and unfair to customers. But then, I’m not sure what can be deemed ‘fair’ in what will be very testing times over the coming weeks and months ahead for us all.” Oatway concurs that there continues to be an influx of deals and demand remains high which, with limited funding lines and an ever-changing market, has led to many specialist lenders reducing their leverage and hiking up interest rates. The importance of a lender that can give clients a quick decision and not change their position during the process has never been more important, stresses Oatway. In order for lenders to be able to do this, there is a greater responsibility on the adviser to present the deal in full, from the start and with all key information. Some believe that an opportunity has been created for those lenders which have previously found it challenging to hit their targets due to the influx of new entrants at high LTVs and low rates; they could now be in a prime position to take back their market share. “Many of the established lenders who did not engage in a price war are now in a stronger position than ever to deliver reliability to an adviser, and this now takes priority over the interest rate,” Oatway says. Amid the pandemic, clients still want to sell, purchase and remortgage their properties according to Whitstance, meaning it should be business as usual for brokers and the industry as a whole. TAKING ACTION Firms across the country have been implementing →
The changes to working practices can be overcome John Ahmed CEO, Movin Legal
orking from home would appear not to be affecting the demand for specialist lending from the market. The problems in the specialist market are more fundamental than that: the amount of properties being put up for sale has fallen; the number of house buyers has greatly reduced; the cost of the money which can be sourced by the lenders has risen; and lenders are assessing their loan-to-value rates, which is discouraging clients. This of course is not helped by the ongoing
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issues relating to surveyors and the ability to obtain searches from a wide range of Local Authorities. All these issues have a negative impact getting cases completed. The lenders are working, despite what they say, at a reduced capacity. The standard office setup due to lockdown has splintered and communication, regardless of what the likes of Zoom and Skype say, must be more difficult. There is no substitute for a face-to-face meeting. A lot of lenders have also been caught on the hoof by the mortgage repayment holidays; many frontline staff who prepare mortgage offers have had to be repurposed to cope with this demand. This has caused
lenders to come out of the market in the short-term to deal with this issue. We do not yet know what the damage from this will be in terms of cash-flow for the lenders moving forward, but it could cause significant issues. So, homeworking, apart from stopping business development managers from visiting clients, and possibly reducing communications between staff within companies, does not seem to be having a detrimental effect on business, but the above issues certainly are. There is some hope, though: if there is a reduction in house prices there will be plenty of landlords out there going for a bargain, which will help the market to bounce back.
Some things never change Today’s market is unpredictable, but some things don’t change. We’re still here to help you and your clients. We’re working with our existing customers to support them throughout these tough times. Whether it’s extending maturities or arranging payment holidays, you can count on us to treat your customers right.
Castle Trust | Belvedere House, Basing View, Basingstoke RG21 4HG | Tel: 0345 241 3079 | www.castletrust.co.uk Castle Trust is the trading name of both Castle Trust Capital plc (company number 07454474) and Castle Trust Capital Management Limited (company number 07504954) both registered in England and Wales with registered oﬃces at 10 Norwich Street, London, EC4A 1BD. Castle Trust Capital plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under reference number 541910. Castle Trust Capital Management Limited is authorised and regulated by the Financial Conduct Authority, under reference number 541893. Buy to Let is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority
MARKET Tyler urges all advisers to become part of a wider focus group which gives individuals access to platforms and behind-the-scenes communications networks, allowing them to remain safe, learn to work remotely, and still deliver the expected information and support their customers require in these difficult times.
strict measures and giving out advice following the outbreak. However, many businesses believe they made significant improvements to their processes prior to the crisis. Richardson says that CG&Co took “swift and decisive” action and put ample processes in place to ensure that it was able to operate comprehensively in the months preceding the UK-wide coronavirus lockdown. For example, the firm arranged for its IT provider to source the most up-to-date laptops in February, to minimise downtime from out-of-date software, and each team member was supplied with a printer and scanner for home use. Richardson stresses that remaining in contact with contractors, security teams, insurers and other service providers is essential to operating at a similar capacity as before. “We remain in constant contact with clients by email or mobile, and that’s not going to alter,” he says. “On those occasions when we’d previously have arranged a face-to-face meeting with clients, we’re now using Zoom to hold conference calls.” With all of CG&Co’s team having been working from home since mid-March, Richardson suspects that remote working will be the new normal for the next few months. For CG&Co and many others, video conferencing is proving to be the ideal way to ensure that social distancing is rigorously adhered to, whilst simultaneously keeping on top of important meetings. Looking to lenders in the specialist finance market, many have relocated key people and functions to a home environment.
ADAPTING Commentators from across the specialist market have varied perspectives on what will be the main pros and cons of working remotely, but its overall impact is undisputed. “I am not old enough to remember the war,” Bartlett says. “So, in my lifetime this is the biggest fight we have had to survive physically, mentally and financially.” Bartlett believes that remote working may encourage the legal system to be more up to date in regard to signing paperwork and producing ID. “This was long overdue, and if during this crisis lenders and solicitors work out a system to do business, this may continue after we return to some sort of normality,” he explains. However, Oatway believes that due to the speed of change, even with modern technology providing much-needed social connectivity, service levels will still be impacted, as decisions from underwriters will take longer. “It is not as simple as before, where an underwriter could turn their chair round and ask the credit department a question,” he says. “Now there are continuous conference calls having to be arranged to get deals agreed.” WATCH THIS SPACE Whether remote working will become the new norm after the lockdown ends remains to be seen; however, a vast number of businesses within the specialist finance sector are adapting to the change and attempting to keep to business as usual as much as possible. Previously, many questioned the influence of technology on the industry, but it appears to have become a vital tool for maintaining business levels and reaching targets away from the office. The extent to which the crisis will impacts those who rely on face-to-face interactions, such as surveyors and BDMs, is perhaps more concerning, as is the fact that, as numerous lenders withdraw their lending books, those remaining are expected to be overloaded. As with the crisis itself, this is a time of constant change. Firms across the country have invested in their staff and technology in order to ensure productivity remains high through these testing times; whilst there are negatives to consider, there are also likely to be a number of positive outcomes as a result of working remotely which may even change the future of the sector. B I www.sfintroducer.com
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Fighting from a strong foundation
What’s more, 59% of members said that they expect to see growth in the turnover of their business in the next six months, although opinions were divided about the prospects for the sector as a whole, with 37% expecting turnover to increase, 30% anticipating to shrink and 30% saying they thought there would be no change at all. Expectations for UK property prices were also positive. While nobody anticipated strong growth over the next six months, nearly 52% of members said that they expected slight growth and less that 19% said they think prices will fall. Finally, opinion was divided
Positivity index Positive
Positive & Neutral
e live in unprecedented and uncertain times. I have today been reading through the results of the ASTL’s latest quarterly members sentiment survey, which was carried out immediately after the Budget. At the time, coronavirus was clearly a big consideration. The Bank of England cut the Base Rate to 0.5% on the morning of the Budget and the headline announcements from the Chancellor all related to the steps the government was taking to help people through the pandemic. The overall sentiment, however, was mainly one of business as usual. Within a few days, the Bank of England cut ruts again to 0.1%, the Chancellor announced another support package that dwarfed the initial measures in the Budget, and it was confirmed that all schools in the UK were to be closed. Lenders, to their credit, have endeavoured to continue to delivering business as usual, but against a backdrop that is anything but. As this article is in preparation, I note lenders announcing new and restricted processes. One is no longer taking new mortgage applications! Valuers are being pulled oﬀ the road and AVM’s will need to become more acceptable if business is still to be written. So, rather than looking forward and speculating about what might happen, I thought it useful to analyse the results of the sentiment survey to understand the thoughts of the industry as we entered this pandemic. The first thing to note is that our members has already recognised the potential disruptive threat posed by coronavirus. When asked whether they were concerned that the coronavirus outbreak would aﬀect their business negatively, 67% of respondents
about competition in the bridging market in the next six months. Nearly half (48%) of members said they expect it to remain the same, while 22% think it will increase and 30% anticipate a decrease in competition. So, what does all of this mean? Overall, bridging lenders are more cautious than they were when the sentiment survey was last held in November, shortly after the announcement of the general election. However, given the circumstances there is still a significant amount of confidence and optimism. As the pandemic continues, this optimism may well reduce of course, but we do know that the bridging industry has entered into this situation from a position of strength and we also know that the sector has pedigree when it comes to adapting to diﬃcult economic situations. The next few months may be tough, but the bridging industry has entered the coronavirus in good shape, and it is positive about the outlook when we emerge from the grip of the pandemic. B I
said yes, and only 7% said no. The remainder were neutral. So, on the whole, there was an understanding that the virus was going to have a detrimental impact. It is particularly encouraging, therefore, that when asked whether they were confident about the long-term prospects for the economy, 73% of ASTL members said that they were confident.
Leap before you look Alan Dring director, MAD Approach
imes of adversity always bring with them opportunities for business and the current coronavirus crisis will prove to be no diﬀerent. That said we do need to have the vision to look beyond the drama of the initial impact of the UK lockdown to what a return to normality will bring with it. It will be a diﬀerent normality, of that there is no doubt, but the clever ones amongst us in the financial service sector are already looking beyond, not what they are doing to save their business in April, and that will need to be plenty, but what their business will look like in October. In recent years I have become an admirer of Dame Helena Morrissey. Many in the FS sector will know her as one of the most powerful women in the city who only recently missed out on succeeding Mark Carney as the Governor of the Bank of England. She is a staunch advocate of women in the board rooms of FTSE listed companies but what I most admire about her is the quirky and diverse way she approaches her responsibilities and how she encourages others,(men and women) to approach opportunities in a similar manner. As brokers and lenders start to look into their crystal balls they will be looking to see how many of them survived and how well they are positioned to capitalise on the market opportunities that will inevitably present themselves post lockdown. I believe the strategic approach of most businesses will have to be balanced between the tried and tested client relationship formula of improving communication with existing client and stakeholder partners and what changes, in such as technology and working
practices will have to be implemented to be successful in the new landscape that will have formed during the crisis period. Dame Helena regularly advocates that you should choose the times when you ‘leap before you look’ in an attempt to use your quirky and diverse approach to brainstorm where the growth opportunities will exist. She does not advocate a complete disregard of the traditional considered approach, rather not, but believes a good management team should always have an experienced ‘quirky’ element who have a reputation for trying and being successful in developing oﬀ the wall strategies, that gives the business that competitive advantage that would not have been achieved if they had not taken that ‘leap’ of faith. I have had hundreds of emails landing in my in-box from lenders and brokers telling me how, because of their advanced technology and their staﬀ commitment to the cause, it is business as normal. I don’t think so. I would advocate that much more needs to be done by the sector to retain their clients and to come out of this confident that their business proposition is more robust than when their world fell apart. Could I suggest that a survey is something that businesses consider to evaluate what their market considers they will be demanding when it is regenerated. Usually surveys are deleted or limited to a couple of Yes or No answers. Now could be the time, when most of us have an excess of
time on our hands, for businesses to sit down and get a survey together that will generate responses from targeted opportunities, who could be the ideal people who will let you know if your quirky ideas will work or not. There will be casualties and I certainly don’t believe too many of the readers of this column will be beating a path to my door in the next six months so this will be the last contribution I
“We need to have the vision to look beyond the drama of the initial impact of the UK lockdown to what a return to normality will bring with it” will be making to the BI mag. It is time to take this opportunity to finally put my feet up and retire (not very good timing as the pension has taken a hit) after 48 years in the sector, great fun, great friends, great memories... until last week. If I can, I will leave you with a request. Please when having your video conferences with your management teams embrace Dame Helena’s approach and exhaust the quirky options that are thrown out for debate, as one of them could well be your salvation. Use the time you have to keep in touch with all stakeholders but make it constructive and use that survey to encourage ideas, not just to reassure things are as normal… they are not! B I
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