BRIDGING Champion of the Bridging Professional
The road to recovery MFS on the future of the bridging industry
Round-table Bridging In-depth Industry Comment
BESPOKE BRIDGING LOANS, MADE SIMPLE. Access to our in-house funds
Rates starting from 0.59%
Direct contact with our skilled underwriters
No hidden costs
Exceptional, professional service
Fast, efficient turnaround in as little as 3 days
020 7060 1234
Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Editor Jessica Bird Deputy Editor Jessica Nangle Jessica@mortgageintroducer.com Deputy News Editor Jake Carter Jake@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Campaign Manager Joanna Cooney firstname.lastname@example.org Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk
Light and shadows
he conversation this month has felt increasingly positive. The full stimulating eﬀects of the stamp duty holiday appear to have taken hold, with everyone from the high street to the specialists feeling the benefits, and business seems to be up across the board. Lenders are reporting a healthy flow of new deals, and the bridging market is feeling particularly well supported as market conditions drive more people to realise the benefits of short-term financing. Although the details are not yet entirely defined, changes to planning regulations are also imbuing a sense of optimism. Although there are undoubtedly countless complications relaxing these regulations looks set to provide a boost to the development market and the wider property finance sector. Even more recently, the government has announced £30m funding to boost its Land Release Fund and One Public Estate programme, aimed at unlocking land for new homes across the country. Simultaneously, Homes England and Invest & Fund have partnered to create a £25m revolving fund to support SME builders. The future looks bright for plans to ‘build, build, build’, indeed. However, at the same time as all this positivity abounds, and the building and development market in particular seems to be about to burst into a period of renewed strength, certain lockdown restrictions are being reintroduced in response to an upsurge in cases. Once again, a lack of clarity abounds. Pubs will remain open for business, but a family of five can only visit one grandparent at a time; sports teams in the double digits can continue to run into each other on the pitch, but groups of more than six friends can’t gather for dinner. So, casting a pall over the excitement of a market returning to strength is the shadow of re-tightening restrictions, reminding us that a second wave and a return to full lockdown could be on the horizon. B I
NEW RATES FOR THE ‘NEW NORMAL’ FROM 0.59% www.sfintroducer.com
020 7060 1234
5 Jonathan Newman Moratorium end harks start of a new challenge 7 Kevin Thomson Are commercial lenders overreacting? 9 Nicky Richmond Raising the roof? 11 Jason Berry New legislation oﬀers immediate opportunities 15 Yann Murciano The first big test for alternative finance 17 Amit Majithia Levelling demand and supply in the housing market 19 Feature: The changing face of broker support Jessica Bird takes a look at online support, virtual learning, and relationship building in a post-COVID world 24 Past, present and future Jessica Bird outlines the discussion points raised at this month’s Bridging Introducer round table, which took stock of the industry’s performance so far, and looked ahead to the year to come 30 Cover: The road to recovery Paresh Raja, CEO of Market Financial Solutions, discusses the business, the market and the future of the bridging industry
email@example.com SEPTEMBER 2020
www.mfsuk.com BRIDGING INTRODUCER
Let’s have a real conversation. We’re committed to helping SMEs and property developers during these uncertain times – it all starts with a real conversation. If your client has been impacted by Covid-19 our range of property secured CBILS loans could help.
Oliver Ward, Head of Operations and Change
Real world lending 0800 470 0430 assetzcapital.co.uk/CBILS The Coronavirus Business Interruption Loan Scheme (CBILS) is managed by the British Business Bank on behalf of, and with the financial backing of the Secretary of State for Business, Energy and industrial Strategy (BEIS). British Business Bank plc is wholly owned by HM Government and is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). Full details on CBILS and the list of participating CBILS lenders can be found on the British Business Bank website at: www.british-business-bank.co.uk/CBILS
Moratorium end harks start of new challenge Jonathan Newman senior partner, Brightstone Law
ny further last minute U-turns aside, the court moratorium on possession claims will end on 20 September. We cannot take this for granted, of course – with the moratorium last scheduled to end on Monday 23 August, a decision to extend it was publicised late on Friday 20 and the statutory formalities were technically concluded after the existing stay expired. The initial moratorium granted in March was for three months. The first extension took place in June, for a further two months. The most recent was for one month only, the shortest possible meaningful extension. This would suggest that it is the final extension, although there will undoubtedly be certain pressure groups keen to see a longer suspension of recovery activity. In my opinion, this would hardly be a balanced approach as far as landlords and mortgagees are concerned; both are currently deprived of enforcing contracts, and both are suffering financially as a result. WHAT HAPPENS NOW?
Current Financial Conduct Authority (FCA) guidance suggests that possession actions commenced or continued before the end of October are unlikely to be in the best interests of the consumer. Whilst this is a guideline only and without statutory force, only the bravest lenders with properly considered and documented strategies will plough their own furrow. And who is to say that the FCA will not extend www.sfintroducer.com
its guidance? So, the question of whether or not to progress enforcement action earlier than the end of October remains a difficult judgement call for all lenders, based on their regulatory status and their acceptance of unknown regulatory risk. Of course, taking the decision to recommence enforcement action and getting a case into the courts are two different things. What we do know, with some degree of certainty, is that the queues will be bigger and waiting times longer – and in that timeline, debt increases against uncertain property market conditions. I’ve written previously about the backlog of cases that are ready to hit the system, and the reduced capacity the courts will have in order to facilitate social distancing. This alone means that we are likely to experience double the delays that we experienced prior to COVID-19 – and those delays were frustrating enough. Then factor in the very likely eventuality that many borrowers may exploit the pandemic’s personal impact to prolong the process even more, and the situation could become even worse. GAINING AN ADVANTAGE
Our job as lawyers is to stay on top of all of this, smooth the process as best we can, and redress as much of the current imbalance as we can, in our clients’ (the lenders) best interests. But what can lenders do to give themselves an advantage when it comes to getting their hearings heard? It is worth noting that the rules do specifically allow for claims to be issued now, but that those issued by the courts before 20 September 2020 will be stayed to that date. So, as a first step, if you have claims which you believe can only be resolved by court determination, or claims in which court action may unlock impasse, then put them into court, and
thereby join the inevitable queue as early as you can. Then, it is important to ensure you have everything in place for each claim to proceed swiftly and without a hitch. Following recent changes to the rules, the courts will now expect to receive, at hearing or enforcement, general information as to the effect that the COVID-19 pandemic has had on the defendants and their dependants. So, if you have not already investigated or recorded that information, you should urgently do so now. If and when you get to a hearing, the provision of such information will be crucial to achieving the soonest, best and most appropriate order. In addition, lenders are required to provide a full arrears history in advance of any hearing, which is eminently sensible and already part of our process at Brightstone Law. Instructing a case with the additional details that are needed for COVID-19 is the bare minimum to get into the queue, but there are other steps that lenders can take to give their cases an advantage against the rest of the pack? TAILORED APPROACH
In the current environment, it’s important that everything is looked at on a bespoke basis. This is why we are working with lenders to create priority claim strategies. Taking a bespoke approach means creating a separate argument for each case based on its own particular details and the factors that may be deemed to be priority in the eyes of the court. So, it is more important than ever before for lenders to have the right lawyers in place, who are able to craft and execute an approach that addresses these dynamics alongside that lender’s unique recovery considerations. The moratorium may soon be over, but in many ways the challenge for lenders has just begun. The period of inactivity has created a melee of demand for hearings and put even greater emphasis on the need to structure cases with skill, expertise and a thorough understanding of all of the many considerations that are at play. Now more than ever, it is time to choose your partners wisely. B I
Fast and friendly bridging finance Known for its speed to complete, bridging finance can deliver funds quickly. Here at West One, not only are we fast, we’re friendly - we approach each and every case purely on its merits, giving your situation the attention it deserves. As we continue to navigate through the coronavirus pandemic, a smile - even from a distance can really brighten your day. Which is why, we’d really love to introduce you to the members of our team.
Michael Grant Head of Sales - Bridging & Development
Matthew Watson Business Development Manager
Imogen Williams Business Development Manager
Mark Hedley Business Development Manager
Amy Medhurst Internal Sales Manager
Jack Slade Sales Co-Ordinator
Why West One? Delivering bridging finance since 2007, we’re proud to have developed a range of products to meet a variety of situations and a reputation for providing a personalised approach to lending. Our highly experienced Underwriting team work with the speed and flexibility needed to help get your clients’ projects safely over the line. All of our loans are available as first or second charge, and have no Early Repayment Charges.
West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England and Wales. Company Number: 05385677. Registered Office Address: 3rd Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire, WD6 1JH.
Are commercial lenders overreacting? FLEXIBILITY AND CHOICE
Kevin Thomson sales director, Connect for Intermediaries
e are all used to hearing the phrases ‘the new norm’ and ‘postpandemic’, followed by people’s opinions on what this may look like. For one thing, appetite has increased for home working among employees across all sectors of the economy. This is clearly shown in the residential mortgage sector, with increased demand for properties with a home working facility – and also for those with outside space, often in towns and the countryside, rather than in cities. COMMERCIAL LENDING
In the commercial world, lenders continue to be cautious. Commercial lenders have picked up on the trend of people avoiding city centre offices and public transport, and some have therefore become more reluctant to lend on commercial properties in the heart of the city. But the serious question is, will this be everlasting? The combination of children being back at school this month, reducing the need for home schooling, together with the unwinding of the government’s furlough scheme, may see an increase in the return to offices and work spaces. The UK economy needs this to be the case, and it is something that the government is keen on encouraging. Only one third (34%) of UK whitecollar workers are currently back in their previous place of work, compared to more than two-thirds (68%) in continental Europe, according to research by Morgan Stanley at the beginning of August. www.sfintroducer.com
However, it has to be accepted that we have moved from the emergency need for home working, to a world in which employers have shifted to enable staff to have more flexibility and the choice of working from home. Sure, businesses will be looking at the costs of their commercial leases, but they will also be looking at the type of premises and type of space they need to enable that safer working environment. Those with a longer-term outlook will be considering not only to their commercial needs now, but also further down the line. The savvy commercial landlord will therefore be ensuring that their premises are of the highest quality in order to make them the property solution that the commercial tenant needs, not only now but throughout what might be a five-year lease. So, the question is not just whether an office or commercial space is needed by a business at this moment, but how they are going to use that space to meet their needs post COVID-19. This then leads to the offices with more adaptable space being the most sought after.
work environment are much harder to make happen virtually. It is understandable that lenders are cautious in the commercial sector, as we are yet to learn how to predict the future. However, a blanket approach is equally unhelpful, particularly in light of the return to work patterns across the continent, where 83% of French office staff and 76% of Italian staff have already returned to their offices. It is highly likely that the UK will follow these patterns, even if it takes a few months yet. We have already seen a more pragmatic effect from buy-to-let lenders, and a growing appetite to lend to the residential investor, with most lenders increasing loan-tovalues (LTVs). I trust and hope it will not be too long before commercial lenders follow a similar pattern, once more making things easier for the commercial landlord. What we are seeing at the moment is a short-term disruption. While it may well cause some long-term changes in working patterns, the commercial lease is typically medium to longerterm, and one only has to look back to the credit crunch to realise that most disruption dissipates. There is always the chance that in a few years we will all be asking ourselves, ‘what pandemic?’ B I
LOCATION, LOCATION, LOCATION
Location has always been a factor, and city centres with good transport links have usually been the favourite. Now, whilst it will undoubtedly still be important, another unanswered question is whether the demand will be for offices in the suburbs rather than city centres. This may particularly be the case if we see a continuation of the current desire for people to live further out in towns and villages. Whilst there are unanswered questions surrounding the role of the office, it remains a fact that technology cannot replace all face-toface interaction. Those serendipitous meetings and conversations that happen during casual conversations in a
Adaptable oﬃces will be the most sought after
0.70% pm 70% LTV £770k max loan
0.75% pm 75% LTV £575k max loan
K E Y I N FO RM ATI O N
Purchase (including an auction purchase), breaking a mortgage chain, or raising funds to purchase a property. Light refurbishment allowed on property (kitchen, bathroom & cosmetic. No structural work etc). Refinance of existing debt.
Rates from 0.70% per month Loans from £150k - £770k No upfront solicitors undertakings available Maximum 12 month loan term
VA LUAT I O N S
A range of valuation options available. AVMs, drive-by’s, short form, desktop and full valuations available.
LT V Up to 75% based on valuation or purchase price, which ever is lower.
S O L I C I TO R S
No upfront solicitors undertakings available.
PAY M E N T O P T I O N S Deducted
OT H E R
Fully serviced (max 70% LTV)
For all other property types, purposes, LTVs and loan amounts, please see our standard plans and the new Custom Collection.
Part serviced/part deducted
Residential (unregulated) property anywhere in England and Wales.
C U S TO M CO L L E C T I O N
The Seventies Collection can be used alongside elements of the recently launched Custom Collection which comprises six different products, features and options.
All client types including individuals and legal entities. No credit score. Any credit status considered. CCJs, arrears, CVA, IVA, bankruptcy considered. No previous experience required.
CO N TAC T YO U R B D M O R S P E A K TO T H E T E A M TO DAY
0345 494 0708
For all products, see the standard plan. For Intermediary use only, must not be passed into the public domain. This indicative guide provides a product overview, it may not be encompassing for all situations. All applications cases considered on individual merits.
All information accurate at time of publication. Hope Capital provides bridging finance for business purposes and does not offer Financial Conduct Authority regulated loans, mortgages or credit agreements. Hope Capital is not regulated by the FCA.
Raising the roof? B) PERMITTED DEVELOPMENT FOR NEW HOMES
Nicky Richmond managing partner, Brecher
hilst the news is dominated by COVID-19 related misery, there are some wh Whilst the news is dominated by COVID-19 related misery, there are some who can’t believe their luck. A number of developers have had a very good pandemic. A combination of the stamp duty holiday, government support packages and the desire to have a garden now that the daily commute is no more, have been a boon to builders. These developers aren’t shouting their successes from the rooftops, as that would be in bad taste. In any event, those very rooftops might well be disappearing soon, if you believe the government spiel about encouraging rooftop development. But is it really that simple? Spoiler alert: No, of course not. There are a number of new rights granted in the recent planning legislation changes. They are set out below, in fairly general terms: A) MAKING YOUR HOUSE BIGGER
A new class allows the enlargement of a dwelling house by construction of additional storeys. Broadly, this allows: Up to two storeys on a detached house, where the existing house has two storeys; One additional storey on a singlestorey detached house; In a terrace of two or more (including semi-detached houses), up to two additional storeys on a house of (minimum) two storeys, or one additional storey on a house of one storey. The right only applies to houses built after 1 July 1948 and before 28 October 2018. www.sfintroducer.com
Class AA: new dwelling houses on detached buildings in commercial or mixed use. This allows up to two new storeys of flats on top of existing, detached, free-standing buildings of three storeys or more, in commercial or mixed use. Class AB: new dwelling houses on terraced buildings in commercial or mixed use. This allows new flats on top of terraced or semi-detached buildings in commercial or mixed uses – up to two storeys if the existing building is two or more storeys, or one if only one storey. Class AC: new dwelling houses on terraced buildings in use as dwelling houses. This allows new flats on top of terraced and semi-detached houses, again two storeys if the existing building is two or more storeys, or one storey if only one exists. Class AD: new dwelling houses on detached buildings in use as dwelling houses. This allows construction of additional storeys on detached houses – two storeys on the topmost storey of a detached house if already two or more storeys, or one storey if only one storey. This all looks pretty life changing, until you read the small print, which includes numerous and quite detailed conditions, including: An exclusion for those office-to-resi developments under existing permitted development (PD); A requirement for reports on overlooking, privacy and overshadowing; No deemed consent after eight weeks – if the local planning authority (LPA) doesn’t approve or reject within eight weeks and then the developer would have to appeal to the Secretary of State; The rights only apply to houses and buildings in certain commercial and mixed uses built after 1 July 1948 and before 5 March 2018; The rights don’t apply to listed buildings, Conservation Areas,
National Parks and the Broads, Areas of Outstanding Natural Beauty or Sites of Special Scientific Interest. There is a raft of other conditions to be satisfied before prior approval will be given. ºIt’s starting to feel a lot less like Christmas and a lot more like planning permission by another name. And let’s not forget the legal hurdles that might impede progress on your stairway to heaven: Top of the charts is rights of light. Please don’t think that satisfying the planning authority means you are home and dry. Legal rights of light are a different animal to planning authority requirements and many a developer has made that mistake, at its cost. Second, do you actually own airspace in a leasehold building? Not always. And there may be telecomms operator equipment on it. Good luck with getting rid of that quickly. Next, service charge can rear its ugly head. The service charge for the other occupiers may be fixed and not lend itself to having two new storeys added to the mix. Common parts may also need altering to accommodate the new development. Existing tenants will need to be brought into line. That may be an expensive exercise. Finally, right of first refusal. To end with the possibility of prison, there is the 1987 Act, breach of which could land you a spot at Her Majesty’s pleasure. And it’s really easy to forget that it even applies. So, as ever, before you reach for the stars, the devil is in the detail and whilst the lack of Section 106 contributions and affordable housing requirements will definitely remain attractive to developers, the everincreasing complexity of prior approval might mean we do not see the rapid alteration of the skyline that is being predicted by some of the more enthusiastic promoters of the new legislation. B I
SEPTEMBER 2020 BRIDGING INTRODUCER
0330 024 9123 In an uncertain world we all need something we can rely on
Movin Legal... Service built around you
New legislation offers bridging opportunities Jason Berry sales and marketing director, Crystal Specialist Finance
ommercial property developers, investors and landlords are savvy breeds, they see certainties where others see impossibilities, or probabilities where others might only see impracticalities. This has been proven time and time again over the decades. The country has faced many troubling financial outlooks, but commercial property developers move forward and plough on regardless, safe in the knowledge that their investments are the correct decision for today and for the future. The new rules regarding stamp duty and permitted development legislation will undoubtedly see these knowledgeable groups seize on immediate opportunities to purchase or extend buildings and switch empty commercial units into residential use, but time is of the essence. For their plans to be realised, they need quick solutions from the specialist finance sector, and that is where bridging finance really comes into its own for them and their intermediaries. CURRENT LEGISLATION
It is worth quickly reminding ourselves again of today’s state of play. The government recently announced a temporary holiday on stamp duty on the first £500,000 of all property sales in England and Northern Ireland. The key word here is ‘temporary’, as this will only be in place until the end of March 2021. The new permitted development rules, meanwhile, which came into effect at the start of September, will mean full planning applications will www.sfintroducer.com
not be required to demolish and rebuild unused buildings as homes, so commercial and retail properties can be quickly repurposed in a move designed to revive high streets and town centres. Furthermore, homeowners will be able to add up to two additional storeys to their home, to create new homes or more living space through a fast track approval process. It is completely logical that these steps will increase bridging transaction levels, but how? IMMEDIATE OPPORTUNITIES
The key short-term requirement will be those commercial property developers, investors and landlords who are looking to develop homes to be sold. To be of major interest to the homebuyer, it may be the case that they have to secure the building and complete the works quickly so transactions are completed prior to the end of the stamp duty holiday. Alternatively, the building may already be owned, which means completing the refurbishment faster is the key. Another immediate concern will be securing available commercial and residential buildings, which will undoubtedly start attracting more attention than they did before, when planning applications would have been long and unwieldy. Of course, the work may then be immediate or longer-term, depending on the business plan. WORKING TOGETHER
It is imperative that lenders and specialist distributors work closely to shape effective bridging solutions, and that intermediaries are directed to the right product for their clients’ needs. Some lenders, like Shawbrook, have excellent end-to-end solutions, while others offer a quick one-off outcome, which may be more applicable for the work at hand.
Despite many lenders leaving the sector since the start of the COVID-19 pandemic, the fact remains that the bridging market still has a wide variety of products on offer. Finding the right one is not always an easy path. The market has done an excellent job of educating brokers, who are now recognising the value of bridging solutions. However, that does not mean they have a complete oversight and understanding of the market. More education is still required to overcome barriers, and of course professional guidance should always be welcomed.
“For commercial developers’ plans to be realised, they need quick solutions from the specialist finance sector” At Crystal, we are certainly seeing brokers who previously would not have entertained a bridging facility now opting for it as an outcome for their clients, and also clients themselves are noticeably much more receptive of the bridging mechanics. Yes there are higher costs, but these are not prohibitive, the benefits of interest roll up, there is the importance of a plausible and validated exit, but these are now equally matched by the speed and flexibility that is required to deliver projects and take care of immediate opportunities. POSITIVE OUTCOMES
While there is a responsibility on developers to build properties which enhance the city centre environments and protect homebuyers and tenants – this has not always been the case in the past. There is also a duty for the bridging sector to ensure that these projects are correctly financed with the right product. The immediate opportunities available to commercial property developers, investors and landlords are very time limited, so with time the key so should bridging be a solution. Let us make the process workable as compared to ineffective, feasible not unlikely. In short, let us work together for positive outcomes. B I
SEPTEMBER 2020 BRIDGING INTRODUCER
WE'LL HELP YOU MAKE YOUR NEXT MOVE BESPOKE BRIDGING AND DEVELOPMENT FINANCE Borrow up to £3 million
Funds in 5 days*
Decision in principle within 2 working hours of approval
01474 33 44 88
*For intermediary and authorised professional use only. Loans are subject to status and underwriting. Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Kuﬂink Bridging Ltd is authorised and regulated by the Financial Conduct Authority (Reg No. 723495). Registered ofﬁce: 21 West Street, Gravesend, Kent DA11 0BF. Company Reg No. 07889226.
Certainty in uncertain times Brian Rubins executive chairman, Alternative Bridging
aying what you do and then doing what you say should be fundamental, but following the events of the past few years – Brexit, elections and COVID – it is now critically important. This is not the time for smoke and mirrors; borrowers must know they can rely upon promises being fulfilled, whether made by a broker or the lender. Experienced executives in the industry should always be able to accurately predict likely terms and the outcome of a proposal unless something quite unexpected occurs. Accordingly, there should be no last minute surprises. Yes, credit committee members’
views are not always identical, but when based on the stated facts this diﬀerence of opinion will not happen very often and should be predictable. Responsible lenders know where there is room to manoeuvre, and when this will not be possible. There is no justification in terms being oﬀered and then renegotiated, unless something previously unknown is learned. Disappointment occurs where heads of terms are based on a 70% or 75% loan-to-value (LTV), when the broker or BDM knows full well that this will switch back to 65% when it is too late for the borrower to go elsewhere. The bait has been used and landed the fish – beware of this tactic! However, the problems are not always of the lender or broker’s making. Property values can be over-estimated by the borrower in the hope the valuer will be encouraged to confirm the suggested figure. After a lifetime
in the industry, I remain appalled at the woefully inadequate information presented to lenders, against which they are asked to make an early (and urgent) decision. It is not diﬃcult to put together a cohesive story supported by evidence. How much easier it is for the lender to make a decision armed with valuation comparables, photographs and a description of the property, and evidence of the borrower’s income. Although many lenders oﬀer nonstatus bridging loans that shortcut does not exist when the borrower wishes to refinance with a building society or high street bank. What value is a decision in principle to the bridging loan lender if it has been issued without any reference to proof of income? Certainty of delivery is the number one criteria by which lenders are ranked. Hold them to account, but help them with factual, detailed information to enable them to provide certainty. B I
London and the pandemic impact Tom Brown managing director, Ingenious
s the residential property market sits in the wake of uncertainty from Brexit and the unprecedented blow of COVID-19, I hear many conversations that conclude that London will never be able to recover, and that the population must be running for the hills. COVID-19 has undoubtedly had a negative impact on city centres, none more apparent than London, exacerbated by an over-crowded public transport network that people are understandably reluctant to return to. But there is more to this trend than meets the eye. Consulting the data issued by Savills on the return of www.sfintroducer.com
the housing market since lockdown, although central London is showing signs of weakness, the suburbs have fared relatively well in recent months. It seems to me that in the longer-term, London’s status as an international hub for travel, entertainment and culture will support its resiliency. Major uncertainty remains in the timing of this, as the pandemic is far from over; nevertheless, city living will always oﬀer a unique range of facilities and infrastructures that prove resilient and attractive in the longer term. Of course, remote working and the significant amount of time spent in the home has led people to reassess what is important to them, and going forward outdoor space and home oﬃce areas will be a compelling feature of any development. However, I don’t see a world where the whole country moves to traditional housing in the suburbs and countryside. Instead, there
are some interesting trends that could accelerate. For instance, an increasing amount of city living may be rental in tenure and perhaps favoured by younger tenants wanting to live near others their age and make the most of the lifestyle benefits of being close to facilities such as restaurants and bars. In addition, the government has clearly prioritised the recovery of the housing market post-COVID with an extension of Help to Buy and temporary reliefs from stamp duty to all buyers. This will especially favour the higher priced London and South East markets, where a ‘discount’ of up to £15,000 is available to buyers of new and second-hand homes. So, whilst London may be seen as having the most to lose, through watching market data and listening to the emerging trends, there is still a large amount of opportunity for experienced developers. B I
Celebrating 10 years of specialist lending solutions
Short term financing to bridge the gap Our Bridging Finance could help your customer get a quick solution to their short term borrowing needs:
Regulated and Non-Regulated Bridging Finance products available
AVMs (Automated Valuation Model) available subject to criteria
FOR INTERMEDIARY USE ONLY.
Contact your local BDM 0800 116 4385 precisemortgages.co.uk
Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549). Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.
Get in touch
Joint legal representation
Levelling demand and supply in housing Amit Majithia principal, Avamore
ike most sectors, the interplay of supply and demand has always determined the health of the housing market. On the supply side, factors including the ability to obtain planning and the accessibility of construction finance have influenced developers’ willingness and ability to build. For demand, the availability of both equity deposits and long-term mortgage options along with stamp duty costs has guided the buyers’ motivation to transact. In July 2020, Rightmove recorded that £37bn-worth of property sales were agreed. This made it the busiest month since Rightmove started tracking the data 10 years ago. In isolation, the figures suggest a near perfect blend of demand and supply following the COVID crisis; more likely, this short-term boost was a combination of paused deals agreed pre-lockdown, as well as the pent-up demand accumulated between March and June. Reports were, therefore, not indicative of medium-term dynamics, but instead of historical demand ameliorated by the government’s response to reenergise the market. STIMULATE SUPPLY
Boris Johnson’s ‘build, build, build’ announcement in June 2020 laid out plans to stimulate supply, including a more formulaic approach to the approval of planning applications – welcome news for developers that had historically been subject to inconsistent interpretation of planning rules. The eﬀectiveness of the changes will depend on the extent to which www.sfintroducer.com
market and are now oﬀering 90% loans at 2.14% p.a fixed for two years. SUPPORT BUYERS
safeguards at an architectural and technical level are used to continue creating roadblocks in the process; but they seem positive on the whole. If this could also be coupled with an obligation on major housebuilders to develop more of their landholdings rather than landbank, supply constraints would be eased, and the market would move closer to its new homes targets. PROP UP DEMAND
Naturally, supply should be met with policies to uphold demand. Previously, artificial government support such as the Help to Buy scheme has proven to be eﬀective. In March 2020, the Ministry of Housing, Communities & Local Government released data which showed that the total value of properties purchased under the scheme since its launch equated to £73.28bn. It has been particularly eﬀective in the South East, where there is a disparity in property prices and income levels, which in many cases have not even been keeping up with real inflation. The announcement of its extension was therefore a relief to many (despite new constraints around the type of property that qualified). The same can be said for the government’s temporary reduction in stamp duty rates, which made the lower end of the market more accessible. The levy payable on a £600,000 property purchase is now only £5,000 compared to £20,000 previously, a considerable reduction on the financial burden to buyers. Regardless of these initiatives, however, the two biggest factors that will actually drive activity are the availability of equity deposits and longterm mortgage finance. Whilst there was a short period during lockdown where the latter was much more diﬃcult to obtain, lenders such as HSBC have returned to the
The bigger issue that remains is that the level of deposits required from firsttime buyers remains persistently high. Banks should be encouraged to be less cautious, but short of a guarantee being provided, it is diﬃcult to see how the government can influence this. One of the major concerns about the eﬀects of lockdown will be whether the end of the furlough scheme will lead to structural redundancies in certain sectors. The government has engaged in a massive support exercise, to the extent that UK national debt has now surpassed the value of the economy. This cannot continue forever. Those who were made redundant early in the crisis may have already dipped into their housing deposits to compensate for the loss of income, and others may follow at the end of the furlough programme. Support mechanisms such as Help to Buy and reductions in stamp duty are important, but may not be able to assist those that can simply no longer buy. Construction output in 2019 was c.£110bn, which accounted for around 7% of GDP. It is therefore no surprise that the government will look revive the sector as part of its wider plan for economic recovery. Whilst clear steps have been made to get developers developing again, reforms to support the buyer appear to have fallen short. The furlough scheme is painting an inaccurate picture, and there has been nothing to acknowledge that the pool of buyers is shrinking. To oﬀset this, we need to see an extension to certain programmes – for example an enhancement of existing VAT cuts – or more creative changes. One option could be to reduce the stamp duty rates for the higher thresholds; this would generate opportunities for downsizers to move without significant tax burden, and the potential to direct some of the equity back to first-time buyer children. Until we see more holistic reform which considers dynamics across the entire market, we may find that new policies fall short of the intended impact. B I
JOIN THE THOUSANDS OF INTERMEDIARIES STREAMING WEBINARS EVERY WEEK!
It has now sowed the seeds for larger portfolio allocations towards the asset class.
Stream every webinar on demand + register for upcoming sessions all on our NEW hub. www.mortgageintroducer.com
COVID-19: A big test for alternative finance Yann Murciano CEO, Blend Network
aving emerged a decade ago, peer-to-peer (P2P) lending has now matured as a fullgrown financial product, with a loyal investor base wooed not only by the returns it offers but also by its flexibility. The concept of P2P lending is not new, yet its potential and scope has increased significantly thanks to a digital disruption that allows investors to invest in pre-qualified loans with just a click and manage their portfolio through a fully automated dashboard. The unique nature of P2P lending as a financial product comes from its ability to blend personal finance and technology in a way that takes the ‘democratisation of personal finance’ to the next level,
The bridging market is a resilient sector
by allowing a wide range of different investors to co-invest together. According to P2PMarketData, peerto-peer lending platforms in the UK have so far provided total funding of £17bn to their borrowers. Also according to this data, Blend Network saw the largest growth in lending on a 90-days comparison, an astonishing 315% increase, and seven out of the seventeen platforms tracked saw growth rates above 100% over the past 90 days. THE FIRST TEST
Before COVID-19, some people in the market would have argued that P2P lending was yet to experience any major tests. But the pandemic has provided an opportunity for these platforms to show their worth. More than that, they have been given the opportunity to be part of the solution, by ‘sitting at the main table’ along with traditional and challenger banks, helping
the government deploy capital to small to medium enterprises (SMEs). In addition, P2P lending has played a key role helping investors deploy funds during the market volatility witnessed since the start of the year, when the S&P500 lost a third of its value in a month and many investors wanted to be in cash.
“The unique nature of P2P lending as a financial product comes from its ability to blend personal finance and technology” CHANGING APPETITES
In recent months, we have seen how peer-to-peer lending was used by investors to access fixed returns that were higher than returns on cash. Many P2P lending platforms, including us at Blend Network, saw a sharp increase in the lending appetite for property-secured, fixed-return loans. What is even more interesting is that it wasn’t only high net worth (HNW) investors and family offices looking towards private property lending. Retail investors have also been attracted, not only by higher returns than on cash, but also by the social responsibility angle of being able to participate in projects that have a significant positive impact. COVID-19 has created an unprecedented time, which has seen many lenders pull out of the market. However, it has also provided an opportunity for those P2P property lending platforms which stayed open to increase their lending. At Blend Network we had our biggest months in terms of lending volumes in June and July. Not only was this an opportunity to help new borrowers who had been left out in the cold by their lenders pulling out, it was also a chance to build relationships with new borrowers who appreciated us sticking by them in volatile times. In summary, COVID-19 provided a test for P2P lending and illustrated how the sector can and must be part of the solution. B I
SEPTEMBER 2020 BRIDGING INTRODUCER
Put your hands together for the NHS.
Donate to your local NHS trust. For professional intermediary use only.
The changing face of broker support Jessica Bird takes a look at online support, virtual learning, and relationship building in a post-COVID world
a stuffy meeting room. On the other hand, there are many situations in which face-to-face knowledge sharing is important. These might be workshops that facilitate organic discussion, or conferences where half the value comes from networking between sessions. Coronavirus has stripped us of these latter opportunities, and caused a subsequent upsurge in virtual options to fill the gap. â&#x2020;&#x2019;
he coronavirus pandemic, and resulting lockdown, was hardly the first moment people first discovered the importance of virtual communication and learning. Anyone who has sat through GDPR, bribery and corruption or workplace health and safety learning modules can at the very least take solace in the fact these legally can happen at your desk rather than in
Expertise for every project Take advantage of our full bridging range, with LTVs up to 75%, and the right expertise to support every type of deal. Property finance made simple
LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). Your clientâ&#x20AC;&#x2122;s property may be repossessed if they do not keep up repayments on their mortgage. For intermediaries only.
BROKER HUBS Virtual event businesses have either risen into existence or come into their own, developing methods of networking and interaction during online events. At Specialist Finance Introducer, our own experience of working towards our much-anticipated awards event later in the year has brought to light the sheer proliferation of new, innovative options for recreating an event that – pre-COVID-19 – would have seemed ludicrous to opt to do online. Now, businesses are not only getting by with events, learning and communications conducted entirely online, but are in fact seeing the benefits. For example, they can run for the same length of time but eat into less of the day, with the time spent travelling removed. As a result, attendance has risen for many, as they are open to those with busy schedules, or even those based too far away to make it into a central London conference room. There is little doubt that, once in-person events are back on the menu for good, we will all rush back to conferences and networking events. However, the lessons learned during this period may well shape professional development and communication well after coronavirus is a distant memory. RAPID INFORMATION SHARING One of the biggest issues during the last six months has been the rapid change in the number and type of products available, as well as in lenders’ criteria and appetites, or even engagement in the market overall. At its simplest and most fundamental, virtual knowledge sharing has taken the form of information hubs that break down these changes. One such example is the Association of Short Term Lenders’ (ASTL) Member Info Hub, which was launched just as coronavirus was starting to take its hold at the end of March. This includes information on lending regions, maximum and minimum loan sizes, types of asset and whether or not lenders currently offer second charges, regulated loans, development finance, refurbishment loans and re-bridging. Vic Jannels, CEO of the ASTL, says: “It provides brokers with easily accessible information about the lending criteria of our members, and so can help them to find the most suitable lender for their clients. This is just one of many steps we are taking, but it provides an important and useful resource for brokers.” According to Jannels, this central hub of information is part of the ASTL’s overarching goal to help keep the market moving. Similarly, Foundation Home Loans discovered, with the onset of rapid changes during COVID, that email alerts were simply no longer enough. Jeff Knight, director of marketing at Foundation Home Loans, says: “From a marketing perspective, the first thing I ever do is find out what brokers are www.sfintroducer.com
talking about. By doing that listening, it was clear that we needed a central point to keep brokers up to date.” One of the key features of Foundation’s broker support hub, accessed via its intermediary website, is a regularly updated breakdown and frequently asked questions around product changes. DEEPER SUPPORT SYSTEMS Foundation Home Loans has taken its online support further than just the provision of data. The hub, launched in May, also provides thought leadership articles and a ‘coffee break’ section, encouraging users to take time to not only learn about key trends affecting the market, but also to pause during what is becoming an increasingly busy working day since the market reopened. To make the most of the opportunity to engage with brokers, and ensure that the hub continues to be as useful as possible, Foundation carefully tracks the data around what subjects are proving most popular. Most recently, for example, traffic has been highest around an article providing top tips for speeding up an application. This gives some insight into the current state of the market, explains Knight: “It’s harder for brokers at the moment as they’ve got to deal with their clients remotely – that slows things down before it even comes to a lender – so we thought anything we can do to help them help us, we’ll do it. “On the buy-to-let side there’s some pent up demand anyway from during lockdown. When the lockdown started to ease and valuations started happening again, that kick-started deals going through. We’ve certainly seen that landlord optimism is the highest it has been for the last four years, about their own business. A number of them are thinking there are options out there in the sector, even before the stamp duty changes were announced.” This use of data, alongside Zoom and Teams video calls, allows the company to focus more on those issues that are of most use to brokers. In the absence of physical events, coffee meetings and lunches, this ability to keep a finger on the pulse is invaluable. HOLISTIC USE OF TECH In August, United Trust Bank (UTB) launched its ‘UTB Secure Chat Hub’, as part of its raft of support services for brokers, taking virtual communications to a highly interactive and integrated level. The app allows customers to communicate with the bank, upload files, e-sign documents and complete security checks; it also allows introducers to register and refer cases and forward documentation, as well as providing a digital communication channel. This is not just a means to an end while manual options are not available, but a decisive step forward. This forward-thinking approach is a key part of UTB’s strategy, says Buster Tolfree, commercial director, → SEPTEMBER 2020 BRIDGING INTRODUCER
BROKER HUBS mortgages: “At UTB we have spent a considerable amount of effort in advancing our digital strategy and proposition, the first meaningful change being the introduction of facial recognition ID verification. “The feedback from customers and Introducers since launching that has been overwhelmingly positive, and so we began to consider how we could deliver other things through this app-based channel and what we could do to improve the proposition even further.” Tolfree continues: “We had already started the work at the beginning of 2020, so it wasn’t a COVID-19 related item per se. “However, we have certainly benefitted from the UTB SecureChat App during this difficult period, as it has made communicating with our customers and Introducers so much easier.” The focus on ease, streamlining and effectiveness, while already on most businesses’ agendas prior to the pandemic, has arguably increased as many organisations discover that tech and virtual solutions are already there for the taking. VIRTUAL LEARNING The ASTL’s Annual Conference is one of the many events that will for the first time be taking place fully online this year. While this has been a necessary move, and one that means some of the more human elements have had to be sacrificed, there are also numerous benefits. Jannels says: “We took the decision to change our approach because of COVID, and it has encouraged us to take a different look at the format of the conference. “Consequently, we have a packed programme of content squeezed into a two-hour slot that everyone can access from their computer – so this makes it more accessible for our members, associate members and other industry professionals.” Crystal Specialist Finance is set to re-launch its webinar series, which was paused earlier in the year. The webinars originally started in Q4 2019, going on into Q1 2020, and attendance by that time had already grown from an initial 25 up to around 130. Now that Zoom and online learning has become much more a part of everyday life across the market, Jason Berry, sales and marketing director, predicts that attendance is only going to grow. These webinars have a commercial benefit, allowing lenders to pitch their products at a time when positive messages about market activity are of prime importance. Berry says: “It’s been a difficult five months. We’re in a marketplace now where we only need to look at the record transaction levels for July to see it’s a different landscape – we’ve got an opportunity to be positive, to be optimistic, and shout from the rooftops about lenders returning, widening their criteria, showing much more ambition and appetite. The message needs to get out there, and the time is now.”
To avoid becoming too focused on selling, the series will be accompanied by a virtual clinic that addresses the challenges, and successes, experienced by brokers. One of the important lessons learned by Crystal Specialist Finance during the pandemic has been about the different resources available for these kinds of virtual learning environments. For the relaunch of its webinar series, for example, it has shifted from a platform that served its purpose previously, to using Zoom from September. The main reason for this is that it allows for greater interaction with attendees, both during and after a session, creating active, engaged communications, and effective follow-up. “It gives us brilliant tools to be able to interact with the brokers, which is a big USP for us,” Berry explains. MENTAL HEALTH Virtual support during this time goes beyond making people’s jobs easier. The ‘coffee break’ section of Foundation Home Loans’ hub, for example, steers away from the more practical, information-heavy side, but serves no less important a purpose at a time of high stress. This part of the support hub includes more relaxing and fun elements, such as a game – which Knight confirms gets heavy traffic – and a chance to socialise. “We’re trying to have a bit more light-heartedness with the coffee break,” says Knight. “So people can realise they’re not alone. It was trying to go beyond just simple updates on applications and products – we wanted to have a much broader approach. “We’ve been trying to keep it positive, trying to keep the energy up.” Another organisation that has factored wellness into its approach to virtual support is Crystal Specialist Finance, which recently launched a health and wellbeing campaign for intermediaries. The campaign commenced in August with a survey focusing on the needs and experiences of advisers and introducers, and includes the distribution of stressreducing crystals, sent to those who complete cases through the business during the autumn and winter. As part of the programme, Crystal Specialist Finance plans to run a series of roundtable events, as well as setting up a mentoring programme, through which industry figures can provide professional support. When it comes to wellbeing, using virtual methods is not simply a case of having no other option under current circumstances, says Berry: “People will like the fact that that anonymity can remain. It’s a brilliant platform for the health and wellbeing aspect because some people would have been a bit nervous about stepping forward if it was a face-to-face event.” This focus on mental wellbeing has come to the fore during the pandemic, with public consciousness of the challenges of isolation, uncertainty, stress and in many sad cases grief, becoming increasingly acute. → www.sfintroducer.com
Fast & flexible. Whether your clients are looking for quick funding solutions for refurbishment, purchase at auction, developer exit or a straightforward capital raise, you can be confident in our specialist bridging finance offering. Unregulated Bridging Up to 75% LTV Loans from £50k to £15m Terms up to 24 months Heavy refurb options available, including for commercial to residential conversions
Get in touch today
0330 123 4521 firstname.lastname@example.org property.shawbrook.co.uk
THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS
BROKER HUBS “Having the webinars is one thing, then we’re using the clinics to look at case studies and how we can help people from a commercial perspective, but also linking it to ‘how do you feel and how can we make you feel better?’ just seems to resonate, and I’m passionate about it,” explains Berry. This is not a new issue in the market, it is simply one that people are now more widely willing to discuss. Berry says: “There’s been an undercurrent of challenge for brokers in the market for the 25 years I’ve operated in it. The industry has probably failed to give support on occasion – it has almost been unseen, or unnoticed and underserved challenge that has always been there. Inevitably, the last six months have made things even more challenging. “Brokers are resilient, they cope and get through the tough times and emerge stronger, but there’s always been a segment of our sector where mental health and wellbeing has been overlooked.” For Crystal Specialist Finance, education on the practical challenges being faced in this market must go hand in hand with communication on the personal wellbeing issues. LONG-TERM THINKING For businesses like Crystal, UTB and Foundation, one of the key considerations in creating these support hubs has been their longevity, rather just than an answer to immediate concerns. “What I didn’t want to do was to have something that’s just for the lockdown period,” says Knight. “We wanted something that would be there forever.” Berry adds: “I really do want to create a campaign that’s sustained and makes a bit of a difference.” Even when face-to-face methods become a reality once more, these virtual support methods look set to continue in some form, not least because they come with various benefits in terms of cost and time. “Even when it does change and we get that [faceto-face] interaction back, virtual events and the interactions that can take place have efficiency and cost benefits,” says Berry. “It’s an interaction that will be more widely accepted than would have been the case pre-lockdown.” Jannels adds: “COVID has accelerated a trend towards greater use of digital resources, as it has shifted people out of their usual habits and forced them to change behaviours, and often this means identifying ways to make improvements.” However, no matter how effective the online methods, face-to-face meetings and interactions are not going to be overtaken. Knight says: “We’ve definitely seen some real advances using online technology – Microsoft Teams, Zoom – that has been very effective for getting messages across and having discussions easily. “However, I don’t think you can actually ever get away from face-to-face communication. As humans
BRIDGING INTRODUCER SEPTEMBER 2020
we are very much social beasts. There’s a time and a place for both.” It is also important, he adds, not to use technology for the sake of it, and to consider the benefits and pitfalls as they apply to a specific business, market or situation. Ultimately, it comes down to what the broker wants and needs to do their job effectively. The beauty of the rise in virtual methods is that now, for those that value their benefits, they are a viable alternative option that is widely accepted in the market. Tolfree adds that the human element is of integral importance in the specialist market, particularly: “UTB is a specialist bank. We will never replace the people in our business with computers, as that would remove the very thing that makes us different and [adds] value. “However, what we will do as part of our business strategy is to implement digital solutions into the journey where they are appropriate, leaving our best and most valuable resource – our people – to complete more value-add activity and less basic administration.” For UTB, COVID-19 has changed more than just the market’s approach to virtual communications and support, Tolfree says: “The game has been changed. There are many, many firms out there that have been using Zoom, Microsoft Teams or Google Hangouts that wouldn’t have considered doing so in the past.” The difference between firms that are using technology and virtual channels just to get through, and those incorporating them as fundamental to business strategy, will be stark going forward. “What is really exciting though is that this is just the start,” Tolfree continues. “We have plans to move more activity into this channel and we are only scratching the surface of what is possible at present. “Lenders and brokers who embrace digital elements in a journey, to compliment the human touch, will ultimately be more successful than those that do not.” MAINTAINING RELATIONSHIPS The sudden shift to home working, and the loss of physical events and face-to-face meetings, might have spelled disaster for an industry so heavily reliant on relationships. However, whether providing information during a period of upheaval, or taking the time to lend an empathic ear, digital communications have played a fundamental role in maintaining this key element of business. Knight says: “The way to keep good relationships is communication. That’s what we’ve been focusing on.” Finally, Berry concludes: “Having that deep and meaningful relationship with a broker has made a difference to how we actually trade together. “In order to have a really collaborative, successful commercial partnership, you’ve got to have a relationship which goes beyond the transactional.” B I www.sfintroducer.com
Cas num aut refe num
0345 241 3079 www.castletrust.co.uk
Our appetite is clear In the current market, we believe that clarity is important in helping you ﬁnd the right products for your clients. Like many lenders, we have reduced our risk appetite in line with the recent market changes. Where we diﬀer is making our appetite clear, so that you know exactly which cases we're able to help you with. As the market regains its strength, we'll be constantly reviewing our product range and criteria to oﬀer the most suitable solutions. You can always ﬁnd the latest information at
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
PAST, PRESENT AND FUTURE Jessica Bird outlines the discussion points raised at this month’s Bridging Introducer round table, which took stock of the industry’s performance so far, and looked ahead to the year to come
THE VIEW FROM THE MARKET Taking a moment to look back and take stock, Ian Miller-Hawes, head of sales at MFS, remembers the positivity felt at the beginning of the year, which made the impact of the pandemic all the more acute. He says: “At MFS we were expecting a big ‘Boris Bounce’, with certainty back in the market everything was going fine, and we were experiencing increased volumes. As soon as the pandemic hit, the brakes hit too.” Gavin Seaholme, head of sales at Shawbrook Bank, agrees: “Overall, it kicked everyone in the stomach a little bit, because [we] finished the year really well and got the momentum into January and February, and everyone was optimistic and looking forward to the new year.” The bridging sector was hit particularly hard, as it
ow that the market has started to turn green shoots into something more weighty, it might be easy – or even desirable – to gloss over some of the uncertainty and concern raised during the last six or so months and instead focus on the future. However, the specialist finance market, as with every industry in the country, will continue to be judged on how it performed during these unprecedented months for some time to come. Bridging Introducer’s Jessica Bird sat down with delegates from Market Financial Solutions (MFS), MT Finance, Castle Trust, Movin Legal, Shawbrook Bank, the Association of Short Term Lenders (ASTL), Bridge Development and LDNfinance to discuss how the market has fared thus far, and what might be in store for the future.
NEW RATES FOR THE ‘NEW NORMAL’ FROM 0.59% 26
020 7060 1234
ROUND-TABLE was also faced with complications stemming from the mainstream market. For example, with mainstream lenders reducing their loan-to-values (LTVs), or withdrawing from the market altogether, exit routes were aﬀected, even for those well into the process for their bridging loan. Rory Cleary, senior business development manager at MT Finance, says: “We were picking up a lot of cases where borrowers and brokers had been let down by the market. In the shock, people pulled their funding, pulled their products, and people were left with the rug pulled out from under them. “Some were still there, though, lending throughout and trying to pick up as many pieces as possible.” While some lenders have emerged well following diﬃcult decisions made during lockdown, Phil Mabb, property finance broker at Bridge Development, has found that the image of others may have soured. He says: “I now look at lenders in a very diﬀerent way, because I’ve seen certain behaviours I didn’t appreciate. Some behaved well – [such as] giving people extensions – but others used it as an opportunity to whack their clients.”
“It was a stressful situation, but it certainly had its upside and built some really good relationships – and rebuilt some relationships with lenders we lost touch with over time” CHRIS OATWAY
COPING METHODS While many borrowers and brokers were left in an unfavourable position, with deals falling through and funding being pulled, the primary priority for most of those lenders changing their product oﬀering, or withdrawing altogether, was rightly that of maintaining stability in the long term. Scott Apps, business development director at Castle Trust, says: “There was a hesitancy, but that’s risk relevant for lenders depending on their business model. Depending on what type of lending they did, it would have been absolutely prudent for the client as well as for the lender to review what they were doing.”
“We wanted to keep the plane in the sky. That’s what everyone had to do. It went as best it could and I don’t think the impact was as painful as we envisioned it could have been” GAVIN SEAHOLME
ACCESS TO OUR IN-HOUSE FUNDS FAST TURNAROUND www.sfintroducer.com
020 7060 1234
Castle Trust reacted to the crisis by revisiting its existing books while dialling back its appetite for new business, and giving borrowers extensions to allow for more time and ﬂexibility to cope and come to understand the options during this period. Apps says: “We took immediate action in terms of our existing cases, and extended everyone that matured between March and September by six months, to give ourselves time to work with them. “The test of the market and lenders was how they dealt with their maturity books. Especially engaging with [brokers] to engage with clients and work out a solid way of solving their problems, or solve them as best as possible.” MFS, meanwhile, continued to lend during the lockdown, taking on business from other lenders where feasible and sensible in terms of risk and reward. For MT Finance, coping with the demands of the crisis was a case of dampening its lending appetite and lowering its maximum LTVs, while Shawbrook also dialled down on risk in order to weather the storm. Seaholme says: “Our strapline was that we wanted to keep the plane in the sky. “That’s what everyone had to do. It went as best it could and I don’t think the impact was as painful as we envisioned it could have been. “You just had to be smart, quick, and keep the doors open as best you could.” SKILLED BROKERING For Chris Oatway, director and head of specialist finance at LDNfinance, one of the more unexpected and positive upshots of this period of uncertainty and reduced options from lenders was an upsurge in the need for creative brokering once activity started to pick back up. Oatway says: “It brought me back to when I was →
email@example.com SEPTEMBER 2020
www.mfsuk.com BRIDGING INTRODUCER
ROUND-TABLE “The lender appetite is definitely there,” Oatway adds, pointing to the development finance sector in particular. “They are creeping back up to the levels seen before. Yes it’s harder work to get something across the line, but it was never easy in the first place. The appetite is definitely there, you’ve just got to make sure the deal fits the criteria.”
starting in the industry trying to place cases – there were a limited number of lenders and you had to be creative in the way you put the deals together. “For those people who had additional contacts, ways of doing second charges, bringing in private investors to make those bridges happen – using some of those lenders who were still in the market, but finding a way to get it across the line and be creative for their clients – there was still plenty of business. “We picked up plenty of introducers and new clients oﬀ the back of other brokers not being able to do the deal. It was a stressful situation for everyone involved, but it certainly had its upside and built some really good relationships – and rebuilt some relationships with lenders we lost touch with over time.” In many ways, Apps adds, COVID-19 has provided an opportunity to reset the market and review the
“We kept all our funding lines throughout all of the lockdown period, and we’re gaining more. If we can be as ﬂexible as possible, it will help our funding lines be stable” IAN MILLER-HAWES
THE CHANGING FACE OF THE MARKET Overall, the shape of the market is yet to return to normal, with product numbers still sitting well below pre-pandemic levels, lending appetites still erring heavily towards caution, leverage having come down across the board, and a number of businesses having exited the market entirely. From Mabb’s perspective, while any loss of jobs is of course lamentable, the harsh realities of the pandemic may have had positive consequences. He says: “That leaves a smaller pool of lenders, but more often than not those same lenders are the good ones anyway, and should have been your first port of call. “As our market has matured, we’ve come a long way and now is a proper true measure for those lenders that are still in it. [A lender’s] reputation will be made or broken, and hopefully there’ll be more made than broken. “The writing has been on the wall as competition has intensified over the last few years, and now it’s
structures in place. He also notes that the most important factor over the last few months has been clarity of information, and the ability to give a certain answer to brokers, even if it is not the one they were looking for. “The lenders [brokers] seem to appreciate the most are the ones that were straight up, even if it was what [they] didn’t want to hear,” he explains. “For the most part for brokers, what they thought they knew [about lenders] went out the window.” John Ahmed, chief executive of Movin Legal, says that this approach from both brokers and lenders has had a positive eﬀect in the long run. He says: “What we’re seeing is the fall oﬀ is less than it was – so the brokers are getting their technicalities right and lenders are giving them the right answer whether that’s a yes or a no. “So, when the business does come through, it’s actually going to completion.”
DEDICATED BRIDGING FUND £60M COVID RECOVERY 28
SECURE FUNDING For MFS, one of the key reasons behind its ability to continue a steady stream of lending throughout the crisis has been its secure in-house funding lines. “We kept all our funding lines throughout all of the lockdown period, and we’re gaining more,” says MillerHawes. “If we can be as ﬂexible as possible, it will help our funding lines be stable.” Similarly, Cleary notes that MT Finance’s diversified capital structure has been a particular boon: “[We have] more than one major institutional investor that it can be a very quick discussion with as the risk – such as of COVID and the lockdown – was approaching. “And then also having a smaller pool of funding as well meant being able to turn left or right if you need to. “I think it’s fair to say [what also helped] was a solid reputation as a company that started oﬀ the back of the last crisis and is still standing today over a decade later, and has a good reputation with its investors.”
020 7060 1234
“The one thing that’s crucial in all of this is the customer And how we pull the best thing we can out of the hat for the customer to make it work for them” VIC JANNELS the final nail in the coﬃn for some, and maybe those aren’t [lenders] we want anyway.” Seaholme adds, along the same lines, that there has been a trend when considering the casualties so far, with the more asset-led firms being more likely to fall by the wayside, while those that are more clientfocused have tended to fare better. Vic Jannels, CEO of the ASTL notes that the fact that panels have tended to contract rather than expand during this period may also be one of the more positive side-eﬀects: “In some of our experience that’s been a good thing. “Things have been far more keenly led and that’s a beneficial aspect.” The other way in which the market has changed is in its day-to-day processes. The use of technology has increased out of both necessity and innovation, while alternative methods of conducting core activities such as valuation have been picked up and – at the very least – trialled to a greater degree than ever before. While much of the market may revert back to its previous shape once the immediate concern of the pandemic passes – with physical valuations likely to remain the primary option, for example – the progress made during the lockdown will certainly leave an indelible mark. Seaholme says: “Tech is going to play a major part – everyone has had their hand forced, and technology is definitely moving forward. “A point that’s key for the market is [that it is] all about the client journey – that’s key now. Technology can improve that. “I’m not saying that anyone should take away the human element – obviously it’s still a risk-based decision – but the process and the journey can be made a lot easier.”
DIRECT CONTACT WITH OUR SKILLED UNDERWRITERS www.sfintroducer.com
SUPPORTING RECOVERY Specialist lenders’ role in aiding economic recovery has perhaps been hindered by issues with those oﬀering support under the Coronavirus Business Interruption Loan Scheme (CBILs), in Mabb’s experience. He says: “Some lenders were quick oﬀ the mark to produce their [CBILS] material, but there wasn’t enough money, there was too much demand, and the bureaucracy associated with it is tremendous. “I’ve seen the documentation – it’s bloody hard work. However, you go to two diﬀerent lenders with the same proposition and they have very diﬀerent treatment of it. Yes it could be down to how the lender gets their CBILs money, but it’s hard work.” This is likely in part due to the fact that, as with all support systems put in place during the crisis, lessons were being learned in real time, with little in terms of a precedent or template to work from. Jannels has a similar perspective: “It’s quite confusing, because you can spend an inordinate amount of time talking the same deal through several times and getting a diﬀerent perspective lender to lender.” Another key issue faced by the specialist lending market in terms of its role in supporting the UK’s economic recovery is a lack of external understanding, says Jannels. The ASTL has worked hard to gain traction and engage with HM Treasury about the role of short-term lending, resulting recently in a Zoom consultation with the head of mortgage policy. Jannels says this has helped to reinforce the importance of the role that short-term lending plays in the rest of the mortgage-led market. “You take bridging loan, you exit out quite often to a mainstream lender or a specialist lender,” he adds. “So there are other parts of the market which are rewarded as a result of that short-term loan.” →
“Certain things just wouldn’t happen if everything relied on term ﬁnance. The speed and agility wouldn’t be there” SCOTT APPS
020 7060 1234
firstname.lastname@example.org SEPTEMBER 2020
www.mfsuk.com BRIDGING INTRODUCER
ROUND-TABLE According to the ASTL, the lenders it represents likely contribute around £5bn to the wider market; while not the most substantial share, this is still considerable, particularly at a time when the sector needs all avenues of support and stimulation to ensure it emerges well out of the crisis and into recovery. “In the broad scheme of things, [it] isn’t the biggest number, but it’s meaningful,” says Jannels. “And when you correlate that to the rest of the industry and everything that goes on with that, and what comes next in terms of the exit, it has a major impact on the mortgage market moving forward.” The role and importance of the short-term lending market may well be coming to the fore, not least due to HM Treasury’s interest in further discussion with the ASTL. SHORT-TERM LENDING, LONG-TERM IMPACT
If you didn’t have bridging, you wouldn’t be able to get some developments, if you didn’t have developments, you wouldn’t get the mainstream lenders placing mortgages on them” JOHN AHMED The perception and role of short-term lending has shifted dramatically compared to the previous recession, and it has taken on a much more prominent place in the market. Cleary points to a decade-old perception of bridging lenders: “When the last crash happened, [I saw bridging finance] as pawn-broking cowboys. “Now, speaking from experience, it isn’t that, or if it was, it has come a long way and there’s plenty of lenders that operate transparently and fairly for clients and brokers.” Apps agrees that the image of bridging has changed over the years: “We’ve all worked hard to change it into something a bit more commendable and respectable, and it’s now the fuel injection in terms of the industry. “Certain things just wouldn’t happen if everything relied on term finance.
“The speed and agility wouldn’t be there.” This need for agility will only increase if, as many are predicting, there are vast swathes of people looking to move out of the city and towards green space in the near future. Equally, where businesses have been impacted dramatically during the downturn, many more will need to look to this market to raise finance to keep them steady. Furthermore, when considering the current government’s pledge to ‘build, build, build’, bridging once again emerges as an important element – both in terms of getting development projects up and running, and feeding back into the mainstream mortgage lending market. Ahmed says: “[Short-term lending] leads onto other parts of the economy. If you didn’t have bridging, you wouldn’t be able to get some of the developments done, if you didn’t have developments, you wouldn’t get the mainstream lenders placing mortgages on them. “It all forms part of the jigsaw, and it’s an important part of the jigsaw as well, especially at this time.” THE FUTURE OF THE MARKET The end of 2020 and beginning of 2021 already have some clear trends in store. The wrapping up of the furlough scheme, the lifting of the repossession moratorium, and the conclusion of the temporary stamp duty holiday are just a few of the mile markers set on the road ahead. The end of the period of stimulation created by the stamp duty changes in particular looks set to cause a dip in terms of market activity. In turn, D’Souza predicts a dip when the furlough scheme closes finally closes in October, but suggests that this may also create various opportunities for the short-term lending market, allowing it to continue to move forward. Ahmed’s perspective is also that, despite some bumps in the road, this is a sector that will inevitably persevere. He says: “The market will keep its pace, as long as there’s not a second wave. It’ll keep moving until the stamp duty incentive comes oﬀ, then there’ll probably be a bit of a dip, and then it’ll move forward again – when has it not?” Despite its ability to continue to operate healthily in the long term, however, Cleary takes a more cautious approach to his predictions for the immediate future,
FAST, EFFICIENT TURNAROUND
WITH NO HIDDEN FEES 30
020 7060 1234
ROUND-TABLE particularly considering that the return to strength being experienced at the moment is being propped up somewhat artificially. He says: “With furlough, stamp duty, COVID, and other things, from a lending perspective it wouldn’t be stupid to anticipate a reduction in asset values. “Asset prices have increased, but if you’re prudent you need to understand that everything’s increasing on the back of multiple pent-up demands, government interventions and liquidity being added to the market. “So, we’ve got to be cautiously optimistic. We have to see what may be on the horizon – it might not be as rosy as it looks today.” For example, Cleary notes that for those lenders that are pushing the risk curve to a greater degree, the backlog stemming from the repossession moratorium might then form a stumbling block. “It’s about being sensible and realistic where you can be,” he concludes. One of the more positive trends on the horizon, albeit one still shrouded in a degree of uncertainty and lack of clarity, is that of the recent planning requirement changes. “With the government loosening planning, speeding everything up, increasing supply stock levels – no one really knows what’s happening,” says Oatway. “If it carries on going in that direction, it could really unlock a lot of land and air for new developments to take place, which will certainly go some way in stepping forward to solve the housing crisis.” AN INDUSTRY TOGETHER For MFS, maintaining a strong market presence is about focussing on service and considering the best interests of the client all the way through the process. This has led the lender to take a close look at its processes to ensure they work for the client as well as possible, explains Richard D’Souza, underwriter at MFS. He says: “From an underwriting point of view, we want to get away from being that tick-box lender, and [instead] thinking about each deal on its individual merits. We did a lot during the lockdown period – there were people coming to us with missed mortgage payments due to the pandemic, and we just had to take a view on that, put it down to the pandemic and still lend to that borrower.”
“We’ve come a long way and now is a proper true measure for those lenders that are still in it. Reputations will be made or broken, and hopefully there’ll be more made than broken” PHIL MABB www.sfintroducer.com
“We want to get away from being that tick-box lender, and [instead] thinking about each deal on its individual merits” RICHARD D’SOUZA
Another example he gives of positive shifts within MFS’ processes is an increased focus on transparency. “We want to be more transparent and upfront with the borrowers,” he explains. “We changed our process slightly to be underwriting cases upfront – so asking for a bit more information from the borrowers upfront, so that we’re not then asking them to pay any sort of valuation fee and then turning a deal down right at the end when we’re about to start legals.” This chimes with Jannels’ outlook on how the market should progress; namely, with the customer at the heart of its operations. “The one thing that’s crucial in all of this is the customer,” he says. “And how we all together pull the best thing we can out of the hat for the customer to make it work for them. “If the answers no, say no quickly – stop the pain and move onto the next deal.” Oatway agrees: “That’s how you build strong client bases is having that relationship with the people you do business with in all sectors, working as one team. It’s never been truer than it is now. Brokers and lenders have to work much closer together than ever before to get deals done.” The consensus among delegates is that whatever shape the market takes moving forward, it will have an increased focus on the client at its core. This is not to say that being client-focused is a new concept, simply that a concerted and clear push is being made towards making positive changes with the client in mind. In addition to maintaining a focus on the client journey, Jannels also put the call out for the entire market to take a cohesive, collaborative approach going forward. He concludes: “The brokers who work closely with their clients moving forward will be the successful ones for the next year and onward. “It’s also essential that lenders work together in any negotiations that we have with the regulator, with the Treasury and in terms of the entire market as a whole. “Together we’re stronger, and the more we are able to negotiate, discuss and project all in agreement, the easier it will be for us in coming years.” B I SEPTEMBER 2020 BRIDGING INTRODUCER
The road to recovery Jessica Bird speaks to Paresh Raja, CEO of Market Financial Solutions (MFS), to discuss the business, the market and the future of the bridging industry
MFS continued to lend throughout lockdown, what do you attribute this to, and how have you adapted to the challenges of recent months?
Put simply: our experience and expertise. Market Financial Solutions was founded in 2006, and since then we have witnessed first-hand how the property and lending markets react during times of uncertainty and economic volatility. Through these experiences, we have ensured that MFS will always be in a position to lend, regardless of the challenges the wider market faces. Most notably, we have ensured that MFS has access to in-house credit lines and a team of talented underwriters who can deliver tailored loans to meet each client’s individual circumstances. During the lockdown, we have been committed to delivering bridging loans to the same high standards. As a result, we successfully delivered well over £40m-worth of bridging loans between 23 March and 1 August 2020. How do you feel the bridging market as a whole has performed so far in 2020? Like most financial sectors, the bridging market has faced a testing period in 2020. While demand for specialist finance remains strong, the lockdown put a freeze on many property transactions. However, the property market has come back to life since July, with
BRIDGING INTRODUCER SEPTEMBER 2020
the stamp duty holiday having the desired effect of incentivising people to buy and sell property again. The bridging sector will naturally benefit from this increase in activity, particularly as many banks and mortgage providers are not yet lending at the same degree as they were at the start of the year. Filling the gap left behind by traditional lenders over recent months, bridging lenders have stepped up to ensure finance is available for those looking to purchase property, particularly in the buy-to-let (BTL) space. More property investors and landlords are aware of the advantages of bridging loans, and are willing to look beyond traditional high street products. The final four months of 2020 should be a busy, productive time for the bridging sector as it looks to recover ground after the difficult lockdown period. How has lockdown changed your processes, both internal and external? Will any of these changes be permanent? Most obviously, we had to close our Mayfair office and, like most businesses, had to adapt to a world where all work interaction was done remotely. We had to ensure our business development managers (BDMs), underwriters and team leaders were communicating effectively so deals could proceed without delay. As a result, we have implemented a new customer relationship management (CRM) system to build and nurture our client relationships. www.sfintroducer.com
Paresh Raja This has already proven extremely fruitful and will certainly be a lasting change for MFS. Has bridging activity or demand seen a notable change since the beginning of the year? If so, what do you see as the key reasons? At MFS, demand for bridging loans has remained consistent; meanwhile, the wider market has experienced a decline in the total value of bridging loans being deployed. A Bridging Trends report recently revealed a 45% fall in gross lending volumes in the first six months of 2020 when compared to the same period in 2019. Given the circumstances, this doesn’t come as much of a surprise. During the lockdown, the government actively discouraged people from moving properties. The uncertainty surrounding the pandemic also meant www.sfintroducer.com
that many investors were simply not willing to take on new transactions, given that it was not known when or how the pandemic would come to an end. Importantly, this decline in activity is not something confined to bridging, but something experienced by the UK’s entire lending sector. Will changes in demand be likely to continue longterm, or will they be short-lived? I believe that demand for bridging loans will pick up in H2 2020 for two reasons: The first has to do with market demand for real estate. Investors are currently seeking safe and resilient assets, and one of the most attractive options at present is property. The second has to do with the advantages of bridging loans as a fast form of bespoke finance. → SEPTEMBER 2020 BRIDGING INTRODUCER
INTERVIEW Much like during the aftermath of the Global Financial Crisis, banks are currently taking longer to deploy mortgages and are adhering to stringent lending regulations. This is likely to result in applications for complex cases being declined. Brokers and borrowers are naturally on the lookout for other solutions, and therefore bridging loans are an attractive proposition. How might coronavirus, as well as the approaching issue of Brexit, affect international buyers’ ability, or willingness, to invest in the UK property market? There has been an uptick in demand for real estate since the introduction of the stamp duty holiday. Importantly, what we are seeing is an increase in activity from international buyers looking for buy-to-let and prime property opportunities in the UK.
“We recently launched a £60m COVID-19 recovery fund to support residential and commercial property transactions for the rest of 2020 and 2021. The funding is available for immediate deployment and is part of our strategy to support the wider recovery of the UK property market as we transition out of lockdown” Data from BNP Paribas Real Estate shows that in the first six months of 2020, investors from Asia spent £628m on London property – an increase of 74.4% on the same period last year. This is particularly impressive given that the UK has been in lockdown for the majority of this time. So, why are international buyers still willing to invest in UK real estate? Essentially, investors are always on the lookout for assets that are secure, located in stable political and economic markets, and positioned to deliver modest capital growth. The UK property market ticks those three boxes, and I don’t believe Brexit uncertainty will dampen demand from international buyers. After all, we should not forget that following Boris Johnson’s actions at the beginning of the year to progress Brexit, the volume of transactions was seen to increase significantly. Above all else, investors want certainty, and so long as there is a clear path towards Brexit, international buyers will continue to look to the UK. What might the upcoming end of furlough mean for the bridging and specialist finance market? The end of furlough will prove to be challenging for the whole market. Those businesses that furloughed
BRIDGING INTRODUCER SEPTEMBER 2020
staff may not be in the position to welcome them back, and this will have detrimental effects nationally, not just in bridging and specialist finance. It’s important for all lenders to navigate this with empathy, and MFS will certainly be doing what we can to help those affected. Conversely, the end of furlough will also create opportunities for some, and we will also be on hand to facilitate that for our brokers and clients. How might the changes to planning requirements affect short-term lending? The government’s reforms of existing planning requirements are positive in supporting the postpandemic recovery of the property sector. They encourage homeowners and buy-to-let investors to undertake renovation and refurbishment projects, which will ultimately increase the value of their properties. Short-term lending is a popular option for those undertaking renovation and refurbishment projects, and we might see demand for this rising as new reforms come into force. The reason is simple: bridging loans can be deployed quickly to meet deadlines, as well as being tailored to meet the individual funding requirements of each renovation project. High street banks do arrange mortgages for renovation works, but there can often be delays when it comes to deploying the funding. Others might consider certain projects to be too high risk, which is why short-term lending is a popular finance option for these cases. MFS prides itself on its strong funding lines, what advantages does this provide, both in general and during the current crisis? The top advantage of a bridging loan is the speed at which funds can be deployed. At MFS, we regularly deploy loans within days of an enquiry being received. We are able to do this because of our established funding lines. Access to in-house credit means our clients can meet their deadlines and don’t have to worry about the delays commonly encountered when dealing with big banks. At the height of the lockdown, we were regularly contacted by clients who had been let down by their traditional lender and needed finance quickly to meet an approaching deadline. Our established funding lines meant we could address these needs quickly. For this reason, since 23 March MFS has deployed over £40m-worth of bridging loans. We have also created a £60m COVID-19 recovery fund to support residential and commercial property www.sfintroducer.com
INTERVIEW transactions in 2020. This funding is ready for immediate release. What are the key trends in terms of funding certainty that have emerged in 2020, and how will these affect the market going forward? The UK property market is renowned for its competitiveness. Buyers will only act if they are confident they have the funding needed to complete on a sale. A key frustration we commonly hear from our clients is not having access to the funding needed to complete on a sale due to delays from their lenders. The situation is completely out of their hands – the longer the delay, the higher the chance of the property chain collapsing. 2020 has demonstrated the importance of funding certainty. That’s why I believe those specialist finance lenders that don’t have access to in-house credit lines will struggle over the coming months. Borrowers and brokers must always find out whether the lenders they intend on using have access to inhouse credit lines. If not, the risk of funding delays is extremely high. During lockdown, MFS commented that a short-term dip in house prices during the period could spur on new buyers; how has this image changed now that we are moving out of lockdown and beginning to see the long-term shape of the market? While it is always difficult to forecast future house price movements, the situation at present is positive. House prices are rising, and the market has recorded a flurry of transactions in response to the stamp duty holiday currently in place. Zoopla recently recorded a 2.5% annual increase in house prices in August 2020, and anticipates that prices will rise over the coming months. Pent-up demand is slowly being released, which goes to show that the buyer demand witnessed at the beginning of the year has not disappeared. Even with the UK in a recession, the advantages of real estate have meant the market is in a strong position when compared to the performance of other assets. Even once pent-up demand has been completely released, I do not foresee international and domestic demand for property dropping anytime soon. With many lenders having had to retreat, at least temporarily, will the effects of the pandemic permanently change the specialist market? With mortgage providers retreating from the market during the lockdown, there was an increase in demand for specialist finance. Borrowers and brokers who would not have traditionally considered a bridging www.sfintroducer.com
loan were compelled to consider their other options, and this has resulted in greater market awareness of specialist finance. It has been reassuring to see specialist lenders step up and fill the void left by high street banks during the lockdown. No doubt, we are likely to see new clients and brokers engaging with bridging lenders, even now when mortgage providers are slowly returning. This is positive news for the wider market in stimulating property investment. Earlier in the year, there was an upward trend in the number of homebuyers looking to purchase via auction. What are the benefits of this option, and is this trend likely to continue? Buying at auction has one clear benefit: knowing that a sale will be completed within 28 days of the winning bid being accepted. During this time, the seller cannot accept a higher offer, meaning it is up to the buyer to ensure they are able to complete the sale within this timeframe. This is why bridging loans are commonly used for auction purchases. During the lockdown, auction houses have also implemented online services, which are likely to remain in place in the long-term. People can undertake virtual viewings and bid for properties during live, online auctions. With lockdown measures easing, I still think online property auctions will remain popular, particularly for buy-to-let investors and overseas buyers. What developments should the market look out for from MFS in the near future? MFS is always busy with new initiatives to support investors and promote the bridging sector. We recently launched a £60m COVID-19 recovery fund to support residential and commercial property transactions for the rest of 2020 and 2021. The funding is available for immediate deployment and is part of our strategy to support the wider recovery of the UK property market as we transition out of lockdown. What key message would you like to get across to brokers about what it is like to work with MFS? At MFS, our top priority is ensuring our brokers have access to the products and services they need. We work with them to ensure they are able to support the needs of their clients and if we say yes, we mean yes. We like to work towards four key principles: reliability, simplicity, trust and transparency. That is what our brokers can expect from us. B I SEPTEMBER 2020 BRIDGING INTRODUCER
IN OUR OPINION
A market in Paresh Raja, CEO of Market Financial Solutions, discusses what might be in store for the bridging industry through the rest of 2020
o say COVID-19 has had a significant impact on the UK bridging sector would be an understatement. Lockdown measures brought the property market to a standstill, and while many high street banks retreated by freezing mortgage applications and removing certain products, specialist finance providers rose up to fill the void. Indeed, in this regard, there have been echoes of the 2008 global financial crisis. With the relaxing of social distancing rules over recent months, the UK government is actively trying to bring about post-pandemic economic recovery. This is proving easier said than done – while the rate of coronavirus infections has dropped significantly, there is still plenty of uncertainty for homebuyers, investors and lenders to contend with. At this point in time, it is important to take a step back and understand where the specialist finance sector is headed in the months to come. Having consulted with our professional networks, the team at Market Financial Solutions (MFS) has identified three trends that brokers, borrowers and lenders need to keep on their radar. AN ECONOMY IN RECESSION A big question on everyone’s mind is determining exactly when the country will be able to recuperate from the economic losses incurred from the pandemic. The Office for National Statistics (ONS) recently revealed that the UK suffered its biggest slump on record between April and June, with the economy shrinking by 20.4% when compared with the first three months of the year. To get the country out of the current recession, it is up to the government to stimulate investment through targeted policies and reforms. So far, the introduction of a temporary Stamp Duty Land Tax (SDLT) holiday has been extremely well received. Rightmove recorded its busiest July in over a decade, and this has resulted in a notable increase in house prices. According to Halifax, property values in July increased by 1.6% – or £3,770 month-on-month.
BRIDGING INTRODUCER SEPTEMBER 2020
Paresh Raja www.sfintroducer.com
IN OUR OPINION
transition As the property market comes back to life, lenders will need to play their part. Specifically, they have to ensure that property buyers – and the brokers they work with – can still access the loans required to press ahead with transactions. If lenders are vocal about being open for business, while still acting responsibly in their lending criteria, then this will instil the confidence needed to help the real estate market bounce back. Of course, we also need to be realistic about the challenges that the market is likely to face in 2020, and understand the role of bridging finance in helping property investors overcome these obstacles. SECURE FUNDING LINES ARE ESSENTIAL FOR LENDERS The competitive nature of the property market means that buyers need to act quickly and complete on a transaction as soon as possible. Delays in receiving a mortgage – or being declined a mortgage having already received an agreement in principal – are common reasons for property deals falling through. Lenders must be able to deliver on their promises. To do so, they must have access to secure funding lines, enabling them to deploy a loan with minimal delay. For high street banks, of course, this is not an issue. However, in the bridging sector, the strength of a lender’s funding lines is a key differentiator between those well-placed to work with brokers and prospective borrowers, and those that advertise fantastic rates but cannot follow through. At the height of the COVID-19 lockdown, MFS was regularly being contacted by property investors who were at risk of losing out on a deal due to delays they were encountering from another lender. Typically, this was because the lender wanted to minimise its risk exposure and undertake further due diligence, or temporarily rescind a mortgage that had already been agreed to. Bridging finance was being issued to cover the funding gap and help the buyer overcome the unforeseen delays. While high street banks and mortgage providers are slowly making their return back to the market, it is likely that delays in funding will remain an issue for the rest of the year, given the uncertain climate we are operating in. In response, we are likely to see demand for bridging loans rise in the coming months. As such, specialist finance lenders need to have the necessary funding lines in place to effectively meet market demands. www.sfintroducer.com
This is why MFS has launched a dedicated £60m COVID-19 recovery fund. The fund has been set aside to quickly finance bridging loans for property investors and businesses seeking to complete on residential and commercial property transactions before the end of 2020. The initiative supports property buyers looking to take advantage of the SDLT holiday and overcome potential delays from other lenders. Most importantly, the funding comes from MFS’ → in-house credit lines and will be topped up as bridging loans are deployed, ensuring capital is always to hand for new loans. SIMPLE LOANS FOR COMPLEX CASES The financial ramifications of COVID-19 have been vast, affecting people’s incomes and investments. Consequently, over the coming months there is likely to be an increase in the number of people who find themselves in complicated scenarios that could jeopardise their ability to successfully apply for a mortgage. There are already reports that homeowners using the mortgage holiday relief scheme are being turned away by banks when applying for a mortgage or taking on more debt. This is happening even though the Financial Conduct Authority (FCA) announced that using the scheme would not impact an individual’s credit history. One of the key advantages of bridging loans is the fact that they can be tailored to meet the individual requirements of the borrower. Rather than adhering to a strict and rigid application process, specialist finance lenders like MFS work closely with brokers and private clients so the bridging loans deployed work in their favour. As a result, with the number of complex cases increasing as people’s financial circumstances fluctuate, there is likely to be an influx in demand for more flexible specialist finance. Bridging lenders must ensure they have the skills and expertise needed to meet the complex needs of brokers and their clients; they must also refine their products and services accordingly. Doing so will provide residential and commercial real estate investors with the confidence needed to act and complete on property transactions. Ultimately, this will help fuel growth in the real estate sector and aid with the wider recovery of the UK economy. B I SEPTEMBER 2020 BRIDGING INTRODUCER
Turning lessons into opportunities Vic Jannels CEO, ASTL
t’s amazing to think that we are rapidly approaching the end of the third quarter of 2020. It’s been a period of time that I suspect few of us will ever forget, or want to repeat, and the excitement of post-election optimism seems a long time ago. I arrived at the Association of Short Term Lenders (ASTL) sharing that post-election optimism, and 2020 was starting to look like a really positive year for all sections of the mortgage world. The unheralded and unwelcome arrival of COVID-19 threw a metaphorical spanner in the works for us all, one way or another. That said, since the start of 2020, the resilience shown by everyone has served to reinforce my faith in this industry, and in the members of this amazing association. As rapidly as the situation regarding COVID-19 changed in late March and April, so did the bridging market. Lenders responded quickly and eﬀectively to government initiatives, changed processes, invested in technology and adjusted their focus. We have seen the traditional qualities of honesty, transparency and loyalty come to the fore as lenders, intermediaries and other service providers pulled together to find a way through. I like to think that at the ASTL, too, we have stepped up to represent the interests of our members and the wider sector. We have been relentless in our attempts to establish a meaningful dialogue with the Treasury, and we have already achieved some success in doing so. We have subsequently provided a robust and detailed submission to the
Financial Conduct Authority (FCA) in response to its call for input regarding the ongoing support for consumers aﬀected by coronavirus. Throughout the year, we have managed to grow our membership and influence, and I firmly believe that we find ourselves in a strong and positive position. In the bridging sector, we are aware that intermediaries are receiving near record levels of enquiries and applications from clients for shortterm finance. The conversion rate to completion is perhaps lower than we have been used to in the past, and the average application to completion time is certainly longer than it has been historically. According to the latest Bridging Trends research from MT Finance, the average completion time on a bridging loan in Q2 2020 was as much as 50 days. SPEED AND DILIGENCE
I appreciate that this can be very frustrating for brokers, and there is a natural correlation between the length of time taken for a bridging loan to complete and the likelihood of the application being withdrawn ahead of completing as circumstances change. At the ASTL, we encourage our members to progress cases with speed wherever possible, but also with their usual high levels of diligence. We must remember that everything we do, as lenders and intermediaries, has the client at its centre. Lenders have a duty of care to ensure that underwriting remains responsible, particularly in the current environment which continues to remain uncertain. So, it is understandable that lenders are taking a little longer to ensure they are making decisions based on all available and relevant information. It can be frustrating to lose cases during the application process, but the sector is in a better position than many of us expected just a few months ago,
and so we must remain cognisant about the challenges around us and manage our expectations accordingly. We are at a point now where we start to look beyond 2020 and plan ahead for 2021, in an environment that so many people are calling ‘the new normal’. As 2020 has shown us, nobody can second guess what is around the corner and it is probably dangerous to try. However, we can take comfort in the fact that we have managed our way through the biggest non-financially inspired upheaval any of us is likely to witness. Lenders dealt with what was thrown at them, and the market has remained steadfast and robust. There will be challenges ahead, but challenges bring opportunity and each of us can approach those opportunities with greater strength, knowledge and wisdom from what has been thrown at us this year. We will be discussing both the challenges and the opportunities that we all face at the upcoming ASTL Conference on 22 September. This conference will be ‘virtual’ for the first time in our history. Just as bridging lenders have adapted and become stronger because of COVID-19, we have evolved our conference and I am really excited by the programme content and format. The event, traditionally reserved for limited delegates from members and associate members of the ASTL, is now open to a wider audience. Our membership can register an unlimited number of delegates, and other professionals with an interest in the short-term lending industry are warmly invited to attend. So, if you are interested in what developments we might anticipate in the bridging market in the coming months, go online to take a look at the content programme at www. astlconference.com, and if you like what you see, you can register to join us on the day. 2020 has so far been a diﬃcult but memorable year, in which we have all learned a number of lessons. I hope you will be able to join us on the 22 September for the ASTL Conference where we will discuss how we can turn those lessons into opportunities. B I www.sfintroducer.com
WE’RE NO.1 FOR SERVICE
We are committed to building strong relationships and delivering the very highest standards of service – we’ve even won awards for it. With instant decisions in principle, an asset-based approach, and proc fees paid on the same day as a completion, with MT Finance it’s effortless. Every time.
0203 051 2331 www.mt-finance.com No1ForService-BridgingIntroducer-FPA-Sept20.indd 1
BESPOKE BRIDGING LOANS, MADE SIMPLE. Access to our in-house funds
Rates starting from 0.59%
Direct contact with our skilled underwriters
No hidden costs
Exceptional, professional service
Fast, efficient turnaround in as little as 3 days
020 7060 1234