BRIDGING Champion of the Bridging Professional
ASTL Bridging In-depth Industry Comment
A precision approach Emily Machin and Adrian Moloney discuss what’s next for Precise Mortgages
Need a rapid short-term bridging finance solution? We’ve got it! With our bridging finance products and a range of solutions tailored to your customers, you could benefit from: Regulated and non-regulated loans available
Standard and light refurbishment accepted
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Precise. Contact your local specialist finance account manager precisemortgages.co.uk
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Contents Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Editor Jessica Bird Jessicab@sfintroducer.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 Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com CEDAC Media Ltd Signature Tower 42 25 Old Broad Street London EC2N 1HN
The next frontier
n the shopping centre near the London flat from which I write this comment, we have recently been graced with a brand new leisure destination. In what was an enormous, desolate husk following the demise of Debenhams can now be found a multi-floor, multi-purpose temple to family fun, with arcades, virtual reality, bowling and an indoor go-kart track, to name just a few, as well as various social spaces and outlets for food and alcohol. On my inaugural visit, my first thought was about how impossible it seemed that this vast space was – until recently – occupied by a single retailer. The second – and perhaps a sign that I should get out more – was to wonder what kind of funding vehicle took the place from dead space to the final frontier. All this is to say that there is a sea-change taking place around how we use our communal spaces, as a country, and bridging is going to be key in taking us onto this next phase. The consensus, at least among those in the market that I have pressed on the subject, is that the time has come for a more mixed-use, multi-purpose approach to our city centres and high streets. Under this new age, leisure, hospitality, shopping and socialising will all come together, even with some residential thrown into the mix. Bridging provides the ability to cover many elements of this journey, such as catering for refurbishments and developments, aiding conversions, and even propping up new businesses while the word gets out and profits start to roll in. For anyone who hoped for a quiet, subdued market once the stamp duty holiday buzz died down, I’m afraid the future is not looking bright. B I
Jessica Bird Jess_JBird
5 Jonathan Newman Fight or flight: Cases to note post-COVID 7 Donna Wells Asking probing questions 9 Jason Berry Brokers can thrive in the bridging market 11 Brian Rubins Time to start building… 13 Luke Egan Lack of slowdown means opportunities 15 James Danks The need for speed in bridging transactions 17 Miranda Khadr Tech in the specialist finance market 26 Round-table: Opportunities for growth Bridging Introducer’s panel looks at the evolving commercial market, and what players need to know as bridging and commercial become more competitive 28 Cover: A precision approach Jessica Bird speaks to Emily Machin and Adrian Moloney about how Precise Mortgages has fared throughout the past 18 months, and what is in store for the future 34 Vic Jannels Time to exercise caution
Speak to your specialist finance account manager today for your next bridging finance solution
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Fight or flight: Cases to note post-COVID Jonathan Newman senior partner, Brightstone Law
e are now entering a very interesting period of ‘legal long COVID’. Lenders have dealt with the immediate effects of regulatory forbearance and enforcement moratoriums, but now face the longer lasting pandemic impact. Debt has increased, real-time loanto-values (LTVs) have jumped, equity eroded, and, in many cases, there is nowhere to go. Debtors face a crucial decision: fight or flight. Perhaps unsurprisingly, many are choosing to fight. Complex and more involved, disputed litigation is on the increase. AHUJA INVESTMENTS LTD V VICTORYGAME LTD
In Ahuja, the High Court disallowed the default rate, which was determined as being obviously exorbitant and oppressive, in other words a penalty. On first glance, the finding of a default rate to be penal – a holy grail for many debtors in legal action – is a major concern. Dig deeper, and you’ll find that in this case the rate hike is 400%, resulting in an annual rate of some 300% per annum. The default rate was 12% per month, and the lender’s lawyers failed, presenting nothing by way of expert evidence. When you leave a judge to form an independent view on market practices and rates, and you fail to identify major issues, you’re asking for problems. On deeper inspection, there is some helpful comment in the judgment. For example, an increase of some 200% might well have been acceptable, and there is overall express acceptance www.sfintroducer.com
that a default rate can be a legitimate commercial device to reflect the greater credit risk of defaulting borrowers. Interestingly – and anecdotally – although the judgment is only just over one month old, I am already seeing it misapplied on multiple cases, as if the existence of a default rate is indefensibly toxic. It is not. TFG SECURITY LTD V SHADE
In 2014, ‘T’ – an unregulated shortterm lender – advanced a total of £209,400 to ‘Mr and Mrs S’, with interest running at 2% per month on the security of a second legal charge over their home. This relied on the business use exemption, for which a form of declaration was signed by Mr and Mrs S with benefit of independent legal advice. However, the business use declaration was not in strictly proper form, and so the lender could not rely on presumption, which would normally follow. The debtors argued that this deficiency, the default rate (4%), and the factual background, came together to form an unfair credit relationship. Well, applying the judgment in Fortwell v Halstead – a Brightstone precedent – the court determined that the debtors ought not to be allowed an advantage because of error in form of a declaration, which they freely gave at the time and which they now claimed to be false at the time. Essentially, what they said was business use when the required the finance, they now say was actually for consumer use. So good news there, and there’s more, possibly. The court did mark down the exit fee, and the default rate, but only after reviewing against the Association of Short Term Lenders’ (ASTL) standard default rate of 3% per month, and it stopped well short of declaring an unfair credit relationship. Also, we see possibly for the first time a quasi-benchmark for market rate at
this time. I think much credit goes to the ASTL and the power and influence of a very respected trade body. WOOD V COMMERCIAL FIRST
Commissions, secret and half-secret, fiduciary duties, bribes and the like are the stock in trade for claims companies, lawyers and campaigning debtors. That this case has the force of the Court of Appeal means that the ripples will spread far and quickly. The precise scope of a broker’s duty to their customer will vary according to their terms of engagement. The precise way in which a broker is remunerated by the lender will also vary, lender by lender, intermediary by intermediary. What we know in practice, is that lender and broker remuneration models can be creative and unusual. So, Wood was there to determine whether the brokers were liable where secret commissions were paid, or if the lender was liable, or indeed both. Wood decided that the test the court need apply is whether or not the intermediary was “under a duty to provide information, advice or recommendation on an impartial or disinterested basis…the duty to be honest and impartial.” So, distinguishing the remedies available where the commission is paid secretly, or half-secretly, becomes the key in determining what remedies are available. The difference can be huge in both fact and principle, ranging from reclaim of commission plus interest in the lesser, all the way to a full rescission of the loan facility – which for the lender is the doomsday result. Indeed, this could be the case even where the lender might be not aware that the commission is ‘secret’. It’s a big case, with significant implications for brokers and potentially massive financial impact for lenders that have failed to fully understand the significance of the lender-borrowercustomer legal framework, and have not got their pre-lend processes, or documentation, in best order. So, three important cases to take note of, yes, but not necessarily three notable cases to fear! B I OCTOBER 2021 BRIDGING INTRODUCER
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Asking probing questions Donna Wells director, First 4 Bridging
t’s been a long and winding road to get back to a point where physical events are now a thing again. Throughout the industry, we’re now seeing awards ceremonies taking place in person, expos reopening their doors, and a multitude of smaller, regional events happening on a more regular basis. Of course, boundaries need to be maintained to ensure individuals feel reassured that health and safety measures remain in place, but we, as an industry, are certainly getting there. Within this time, the importance attached to face-to-face interactions has certainly not diminished – if anything, it has intensified. This was evident in our recent series of specialist lending seminars. Held in conjunction with a number of specialist finance providers, these focused on bridging, complex buyto-let (BTL), second charge and commercial finance, and offered attendees real insight into how lenders and packagers are approaching the current lending environment. Although we were limited in the number of brokers we could invite, it was highly encouraging to see such positive interactions and levels of engagement take place with our team and our lending partners, many of whom were there in full force. BROKER FEEDBACK
It was also interesting to seek feedback from brokers we hadn’t worked with before, and to offer them the platform to voice their frustrations from both a lending and packaging perspective. I’ll swerve the direct lending-related feedback, and instead focus on some of the frustrations stemming from previous packager interactions, and how we can overcome these: www.sfintroducer.com
Having to submit everything through a portal, meaning you can’t discuss a case with someone directly. Not having a go-to person, meaning it can be a struggle to receive updates or get call-backs in a timely manner. Taking too long to come back with terms when an enquiry was submitted. These represent the most common frustrations we heard from brokers at these events, and also when discussing previous experiences of working with some packagers in the past. Technology is an interesting one. This is something that can be both a blessing and a curse when it comes to the more specialist cases. We all utilise technology, whether this is
“As a packager, we have to embrace the best elements of technology, but this cannot and should not come at the cost of direct interaction with a person who can deliver a simple update on a case” to help source relevant information, to communicate with people, or to streamline some of the simpler processes we encounter on a daily basis. Having said that, I fully understand the frustrations when technology becomes a barrier to getting an answer, rather than providing one instantly. As a packager, we have to embrace the best elements of technology, but this cannot and should not come at the cost of direct interaction with a person who can source an appropriate answer or solution, provide reassurance or deliver a simple update on a case. This interaction is certainly at its most effective when brokers have one point of contact which shoulders the responsibility for cases, and this is certainly something that we are huge advocates of. As a business, we are constantly monitoring the speed and efficiency of
our team when it comes to dealing with cases from application to completion. The recruitment process is never easy, but in recent weeks we have attracted two outstanding talents in the form of a key account manager – covering London and the surrounding areas – and an underwriter, to provide an even stronger level of expertise and support for new and existing intermediary partners. It remains vital to build relationships and better service the needs of our lending partners as well as our introducers. After all, if we can’t match cases with an appropriate lending partner in a timely, effective and responsible manner, then we will soon become redundant. This leads me to the final frustration: Brokers feeling that they still did most of the work, but that the packager was getting paid a lot of money for it. For any good packager, the value stems from their expertise and experience. By this I mean how they identify the right solution, how they collate the relevant information and their clear insight into how individual cases can fit within certain lending criteria to provide the right outcome, often within tight timeframes. Lenders also trust us to ensure they receive expertly packaged cases which allow them to generate valuations, instruct solicitors, complete and release funds within these highly restrictive timelines. This is the type of value good packagers have to offer on each and every case – all whilst providing reassurance that the borrower in question will remain the introducer’s clients, and picking up as much of the admin slack as possible along the way. It’s vital that intermediaries continue asking probing questions of their packaging partners, and if they aren’t performing to the required standards then they should simply move on. After all, there are packagers out there who can support all their specialist needs. B I OCTOBER 2021 BRIDGING INTRODUCER
Brokers can thrive in the bridging market Jason Berry group sales and marketing director, Crystal Specialist Finance
ost areas of the property finance market have had a positive 2021 so far, helped in no small part by the stamp duty holiday. However, there are few areas where things are quite so buoyant as the bridging market. A study by Shawbrook Bank earlier this year polled brokers on how they felt about the various areas of the property finance market, and which sectors they expected to see the biggest growth. Bridging came out in a resounding first place, having secured more than a quarter of the votes, ahead of semicommercial buy-to-let (BTL). That’s worth reflecting on – the market is in an incredibly positive position already, and advisers believe that it is only going to become a more in-demand area of property finance in the months ahead. So, what is it about bridging loans that make them such a useful option for advisers and their clients? And how can brokers ensure they benefit from this boom, and thrive from the growth of bridging loans? A FAST OPTION
The speed of accessing funding is a huge selling point when it comes to bridging. All brokers will have had property investor clients who have spotted the perfect investment property at a bargain price, but they need to move quickly in order to secure it before other potential buyers are able to move in and turn it into a bidding war. Traditional BTL mortgages are not exactly renowned for their speed, meaning the investor is likely to be www.sfintroducer.com
waiting for weeks in order to get hold of the funding required, by which point the property may no longer be quite such a bargain. By contrast, with a bridging loan the turnaround is far quicker, in some cases resulting in the client receiving the funds within just a few days. It’s not just investors trying to get in ahead of the competition that can lead to those time demands, though. Whenever a client is against the clock in hoping to seal a purchase, a bridging loan can be an excellent option. FLEXIBLE FINANCE
Of course, speed is only one of the aspects of a bridging loan that make it so compelling. The flexibility is also worth highlighting, as bridging loans can be used for a range of different purposes. Auctions are a useful example here – if your client wants to purchase a property at an auction, then they will need to be able to provide the full funds within a month of the auction date. That won’t be easy with a regular mortgage, but auction finance – in itself a form of bridging loan – can make that purchase a reality. Bridging loans are also an excellent tool should your client want to purchase a property that’s currently in some state of disrepair, and which they would not be able to raise a traditional mortgage against. Perhaps the property is missing a kitchen or bathroom, but boasts significant potential for a refurbishment, and could then be sold on or held as a buy-to-let investment? Bridging lenders are well-acquainted with these types of bridge-to-let cases, and so are perfectly placed to deliver the funds that can make the purchase a possibility. What’s more, bridge-to-let offers the investor some certainty; they have an exit route from the initial bridging loan already worked out.
CASHING IN ON COMPETITION
One of the big factors behind broker confidence in the bridging market is the level of competition. The demand for bridging loans, as well as its improving reputation, has meant that over the past few years a host of new lenders have opted to enter the bridging space. In a bid to stand out from the competition – and attract a slice of the bridging business – lenders have had to be more innovative. That has meant taking a more positive approach to the products they design, the process they employ and – crucially – the rates they charge. Brokers and their clients have benefitted from the incredibly competitive rates on offer, and with no sign of the competition cooling off, nor of demand for property reducing, the ingredients are there for an even more active bridging market ahead. Of course, that level of choice can be overwhelming, too. If a broker isn’t that familiar or comfortable with the bridging market, then they may not feel best placed to help their clients, should the need for a bridging loan arise. That’s why it makes sense to work with specialist partners who can help you identify the lenders best placed to work with your client, no matter how unusual the case may be. It doesn’t have to take long, either. We launched our online hub so that brokers could populate client requirements within just two minutes, and then be connected with an underwriter, so that terms can be shared and agreed immediately. From my years of experience in this market, it’s clear that the savviest property investors have been using bridging funding for a long time; crucially, they see it as a solution which helps them create wealth, rather than as an unwanted cost. Dealing with bridging opportunities needn’t be daunting for those brokers only dealing with one or two cases each year. By collaborating with the right partners, you can ensure the client receives the best possible outcome every time. B I OCTOBER 2021
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Time to start building… Brian Rubins executive chairman, Alternative Bridging Corporation Limited
otwithstanding the cessation of the stamp duty holiday, supply chain problems, labour shortages and ending the furlough scheme, our economy is telling us it is time to get going – to start new housing developments. This will need finance. For national housebuilders, finance is on tap through the major banks and capital markets. They also have substantial retained profits to invest. However, even the big fish feed off landowners through options, deferred completions and part-payments. Rarely do smaller developers have these luxuries, so let us take a look at what is available for them. Residential development finance (RDF) is a wide offering, from finance to purchase sites, funding of development costs – including fees and interest – to holding finished stock pending sales. It also includes refurbishment, extension and conversion. There are limitations on what can be borrowed, but there is no shortage of liquidity. The first port of call is usually one of the high street banks, but unless the borrower has a strong existing relationship this is unlikely to be fruitful. It is less expensive than the alternative sources, but in recent years far less readily available. This has opened up opportunities for challenger banks, alternative lenders and brokers. So, what is available? Unlike bridging finance, where loans are governed by loan-to-values (LTVs), RDF is geared to loan-to-grossdevelopment-value (LTGDV). This is far more generous, because it takes into account the added value which occurs on completion of the construction. In calculating how much can be applied to the site purchase, the lender www.sfintroducer.com
will first review the GDV and lend up to 65% against this value. From this, they will deduct the cost of carrying out the project, and the remainder is available for the site purchase. Although some lenders are more conservative, 65% of GDV can be achieved, which will break back to approximately 80% of total cost. While most developments of up to 20 units can be built in 12 months, with a sales period of six months, loans can be for up to 24 months where necessary. VARYING FEES
Interest rates and fees vary from lender to lender, and take into account the size of the loan, the experience of the developer and the level of gearing. For a typical loan up to £5m at 65% LTGDV, interest will be between 7% and 10% per annum. There will be the lender’s arrangement fee of 1%, and probably an exit fee, at 1% of the loan payable from sales proceeds. At Alternative Bridging Corporation, we have introduced reduced interest rates after practical completion and an extended loan term, if needed, to enable sales proceeds to be maximised in an orderly, less costly way. For larger loans, say £5m upwards, stretched senior debt and mezzanine loans have been available for some time, whereby 75% of GDV, say 90% of cost, is advanced. In recent months this has also become available for loans starting at £2m for experienced developers, those who can evidence at least three similar previous projects. Pricing will include a larger exit fee to compensate for the higher risk. But there are important considerations other the interest rates and fees. In particular, the support from the lender’s asset management team – the people who make sure monthly stage payments are released on time to enable suppliers and sub-contractors to be paid. They should also be on hand to help to deal with delays in the programme and increased costs, both of which are prevalent following labour and material shortages.
Lenders new to RDF do not necessarily have the resources, experience or capability to take the longer view when problems occur. Further, experienced lenders will guide the developer through the drawdown process, which is more complicated than for a bridging loan. The lender will require a valuation as is normal, but unless the scheme is very small, they will probably also appoint a monitoring surveyor (MS) who will review the project before commencement and carry out the monthly stage payment valuations. The MS will review the planning permission requirements, particularly pre-commencement conditions, investigate the contractor’s capability and check if a homeowner’s warranty has been arranged. This takes time. RDF is much more than ground-up residential developments, and includes refurbishment and the extension of single homes by both developers and owner-occupiers. Again, the formula is to lend against GDV, even though light refurbishment is, in fact, the extension of a bridging loan. It is limited to non-structural changes and excludes extensions. However, heavy refurbishment includes extensions, basement-digs, extra floors and internal rearrangement, and will be treated as RDF and not a bridging loan. When lending to an owner-occupier for refurbishment, the loan is regulated, and therefore cannot be for more than 12 months. This demands careful planning to ensure construction can be completed within nine months, leaving three months to refinance and repay. Also, homeowners do not usually have prior experience of residential development, and need a strong contractor and professional team. RDF is the natural extension to bridging loans, and a route to additional business and larger loans for brokers to pursue. There is a learning curve, but a close association with an experienced lender will help to close the deals. B I OCTOBER 2021
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Lack of slowdown means opportunities Luke Egan director of bridging and development, Pink Pig Loans
peak to anyone in the bridging market, and you’ll hear a similar story. Most firms, whether advisers or lenders, had record-breaking months in June. It’s not a huge surprise – just as the regular mortgage market saw swarms of buyers trying to get their purchases across the line before the stamp duty holiday deadline, so too did bridging firms see all sorts of investors looking to add to their portfolios. Indeed, the nimbleness of the bridging market meant that it was perhaps easier to clinch those deals through a short-term loan than by relying on the creaky processes employed by some mainstream lenders. This is borne out by figures from the Association of Short Term Lenders (ASTL). Bridging applications in the first quarter of 2021 totalled £7.49bn, up by a striking 25.5% on the same period in 2020. But what’s really interesting is that the predicted slowdown in the market
since the stamp duty deadline hasn’t really happened. Sure, we’re not quite seeing the frenzied activity levels of June, but equally we are a long way from the usual drop in caseloads that typically accompanies the summer holidays. STRONG ACTIVITY
There are all sorts of reasons for activity remaining so strong during what is traditionally a quiet time for the bridging sector. For example, there’s no doubt that the permitted development (PD) situation has played a part. Certain permitted development rights (PDRs) covering the change of commercial properties – like offices and shops – into residential property concluded at the end of July. We saw no shortage of buyers moving in order to beat that particular deadline. The prospect of a second partial stamp duty holiday deadline at the end of September has also prompted investors to get moving and try to purchase new additions to portfolios. But there is the health of the property market generally, too. The prolonged periods people have spent at home have caused many to reconsider what they want from their living situation, and consider different areas and different
Pedal to the metal: Lack of summer slowdown offers opportunities for advisers
types of property. Investors are well placed to take advantage of that changing appetite for owner-occupiers and tenants alike. MORE GROWTH AHEAD
Many brokers are only too aware of just how bright the future appears to be for the bridging market. When Shawbrook Bank polled advisers last month on which area of the market they expected to see experience the strongest growth in the second half of 2021, bridging came top at 26%, ahead of the likes of semicommercial and buy-to-let (BTL). When you consider the fact that the bridging market already had a notably strong first half of 2021, it’s clear that momentum is really building behind this area of the lending market, as more brokers and their clients become attuned to the benefits that a bridging loan can provide for their investing strategy. The demand seen across the bridging market at the moment is hugely encouraging. It shows real confidence among the nation’s property investors that they can see the potential, from adding to their portfolios to simply selling on properties for a profit following some light improvements. PICKING THE RIGHT PARTNERS
The growing bridging market can provide real opportunities for advisers who perhaps ordinarily don’t deal with short-term loans. The demand is clearly there from clients, but identifying the right lenders can be far from straightforward if it’s an area of the market you rarely look at. That’s why partnering with a specialist can prove invaluable. Rather than turn away those enquiries, you can help those clients find the finance they need for their purchases, safe in the knowledge the client will be advised and treated professionally, while you also enjoy an additional revenue stream. The bridging market is continuing to grow and strengthen. Proactive advisers can benefit from this, even if they don’t feel able to provide the necessary advice to clients themselves. B I OCTOBER 2021 BRIDGING INTRODUCER
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The need for speed in bridging transactions James Danks head of bridging and development, Finance 4 Business
s the developer market starts to gather pace after a pandemic-induced lull, intermediaries should be looking at ways to help clients maximise the opportunities that arise, to make up for significant lost time. A real area of focus should be speed – which is often of the essence in bridging finance transactions – and there are a variety of ways to help achieve this. VALUATIONS
In the current fast-paced and everevolving technology arena, there’s barely a sector untouched by the advancements. The use of desktop valuations, for example, is significantly speeding up processes in the lending world. Where a valuation survey process could take in the region of a week – with the drafting of the report bringing the whole procedure into the region of a fortnight’s lead time – the increased use of technology to achieve this in minutes is a real benefit. Intermediaries should seek to work with brokers who have access to lenders using this type of solution, which is thankfully becoming much more commonplace. A perfect example of where this has been invaluable was in a recent case we dealt with. A client was in the process of buying a new property, and was contractually obliged to complete with a certain timescale. Unfortunately, further down the chain a buyer pulled out, as their mortgage was refused at the eleventh hour. This left our client with only two weeks to complete on the purchase, and www.sfintroducer.com
if they failed to meet the deadline they were at risk of losing the property and the deposit that had already been paid. Thankfully, we were able to step in and arrange a bridging facility using a desktop valuation, which saved a lot of time and hassle for our client and avoided the potential disaster of losing the sale and the deposit. The facility completed on the agreed purchase date, leaving us with an extremely relieved and pleased client! SOLICITORS
Legals is another area that can add delay to the lending decision process. Using solicitors that are experienced in what is involved in preparing for bridging finance transactions is the best route. Many clients bring their own solicitor into these processes – solicitors that may have dealt with family affairs through generations and may be ‘allrounders’. However, intermediaries should advise clients to use legal teams that are well-versed in this area. In some cases, those lenders that are employing the latest valuation
A master packager can make a transaction seamless
technology also offer appropriate legal representation – making the process even more efficient. We recently worked with a client who insisted on using their own solicitor. Two weeks down the line, the necessary documentation had not been processed and we had to employ our specialist legal team to assist in achieving the transaction. This ended up being a much lengthier process than it needed to be, and cost the client valuable time and money. PACKAGERS
This is where the value of a master packager can make the difference between a smooth and seamless or long and drawn-out transaction. Working with a partner which understands the bridging market and can quickly identify the right lender and the right partners to help facilitate the deal – whether that be specialist legal or the right insurance provider for the project in question – is crucial when time is of the essence. Having a broker that has relationships with – and therefore access to – a large pool of lenders from which tailored solutions can be developed, is key. Certain lenders utilise online portals where forms can be pre-populated with much of the data, to speed up processes, while others have products where perhaps the underwriting and legal process has more relaxed criteria and is streamlined. With the right broker who has the knowledge of and access to this breadth of lenders, a deal can be on the table within a couple of hours. A variety of factors are likely to bring more property investment opportunities to the fore. Due to factors such as the lifting of restrictions on tenant evictions and the end of the stamp duty holiday, it has already been reported that prices are on the downward trail, falling by £9,000 between June and July. Then there’s the potential impact of the end of support from the Job Retention Scheme, and the rise of in-person auctions spurring investor activity. So, intermediaries should be poised to help clients achieve smooth and speedy transactions by using the right partners. B I OCTOBER 2021 BRIDGING INTRODUCER
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Tech in the specialist finance market Miranda Khadr CEO and founder, Pitch 4 Finance
ver the past 12 months, fuelled by COVID-19, we have been seeing greater technological innovation in the specialist lender market than ever before. This must be celebrated, and whilst technology cannot replace the wisdom, experience and resilience this industry has shown, certainly over the past 18 months, it can make the process of specialist broking and lending far more time and cost eﬃcient. Whilst we have all been on what seem like endless Zoom and Teams calls, technology really had to come to the forefront at a time when having face to face meetings was almost impossible. Throughout this pandemic, we have seen lenders, intermediaries and solicitors all take measures to allow transactions to occur, such as signing and witnessing documents over Skype or other video conferencing facilities. The specialist lending market prevailed in using technology to solve the problems posed by lockdowns and the lack of face-to-face meetings. We have seen anti-money laundering (AML) and know your customer (KYC) searching systems adopted more and more throughout the industry, with lenders participating in new ways of checking clients’ identities. Other areas of technology are also enabling professionals in this industry to make the specialist lending market more streamlined and responsive, and at a pace that I am unsure we would have seen if we hadn’t gone through the pandemic. Some lenders, for example, are adopting automated valuation models (AVMs) and testing these on certain assets in certain locations. This shows
that lenders are willing to rely on third-party technology to partly solve the pressure on valuers during the huge increase in house sales. Not only is this potentially a great time-saving exercise, enabling transactions to proceed speedily, it also brings a cost saving benefit for borrowers involved in real estate transactions. Marketing systems cannot be left out of this important technological advancement. There are now ever more ways of communicating with your ideal target market in ways that almost seem unnoticeable. If reaching out to a particular company for research or an enquiry, we search through Google and pinpoint the individual on business networking platforms – all at the touch of our fingers. These platforms provide us with unending information and much faster awareness of the markets that we work within, forming part of the core landscapes of our businesses. It’s hard to believe that this work used to be carried out through business cards and printed directories. There are numerous applications that help cashflow forecasting for
property developments, plus better and easier accountancy tools for providing accurate business forecasting. There are a also greater number of platforms providing great sources and resources in the specialist finance market. These allow us to check solutions, find ones we may not have been aware of, and source a far vaster number of lenders across the market. Whilst the growth of technology is an important leap in our industry, this has to work alongside great customer service functions. They cannot work independently of each other. Recent numbers at mortgage and finance events show that we all like to meet face-to-face, have discussions and spend time with each other. The role of human relationships has probably never been so important, and will remain so for everyone in our industry, but the two factors of people and technology do not need to be mutually exclusive. There is no doubt that technology in this market is developing at a fast pace, providing us with systems that will make our roles easier and more eﬀective, allowing us to make better use of our time. The integration of technology in our industry provides cost eﬀective and less time consuming solutions to the professionals operating in our market. It would be a shame not to try them. B I
Technology provides cost eﬀective and time saving solutions to the industry
EYES ON THE HORIZON
S As the final quarter of a busy and unique year begins, Jake Carter takes a look at what might be in store for bridging before the end of 2021
ince the pandemic hit Britain in the first half of 2020, the entire country has had to face unpredictable change on an almost daily basis. From the early days of daily government updates to successive lockdown restrictions and travel bans, or the sudden move to home working, the past year and a half has taught the UK population to adapt. The property finance market has faced much the same sense of flux, from lenders initially pulling back their appetites and tightening criteria, to more positive trends, such as sharply rising activity and demand, buoyed in part by the stamp duty holiday. In more recent months, bridging finance in particular has settled into something of a regular pace, albeit a high one, with fewer sharp shocks and less fear of hidden cliff-edges. However, in the last quarter of the year there are numerous changes expected which will have an effect on the bridging market, such as the aftermath of the stamp duty holiday conclusion and that of the longrunning furlough scheme, which could leave the UK to discover the true effects of the pandemic, hidden behind government support. SUSTAINING DEMAND Roxana Mohammadian-Molina, chief strategy oﬃcer at Blend Network, says that the bridging market has witnessed a rapid transformation in the past year alone, with lenders expanding their teams to keep up with a level of demand that does not look like it will abate any time soon. Indeed, she says this market has evolved vastly over the long-term, and is “unrecognisable from the sleepy market it was until a decade ago.” Certainly, with MT Finance’s Bridging Trends data finding that total gross lending rose from £144.51m to £146.52m between Q1 and Q2 2021 alone, this market seems far from “sleepy.” Nicholas Mendes, senior specialist adviser at John Charcol, expects there to be continued high activity and demand levels in the bridging market moving into Q4. He says: “Lenders will continue to step up their business efforts, with rates dropping further and criteria being loosened. Already we are seeing higher loan-to-value [LTV] products being introduced across the board.” → OCTOBER 2021
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MARKET XXXXXXXXX Although the passing of the final stamp duty holiday deadline might make for a slight reduction in the frenetic pace within the mainstream market, the fact remains that there are fewer properties on the market, demand remains high, and completion times are lagging. As such, Mendes says that bridging will continue to be in high demand in order to get regulated transactions back on track and over the line. He also believes that clients are conscious of the supply and demand dynamic currently at play in the market, and are looking to move quickly, with bridging also offering the appealing option to present as a cash buyer. Jason Berry, group sales and marketing director at Crystal Specialist Finance (CSF), believes that many areas of the property finance market have had a positive year so far in 2021, helped by the stamp duty holiday, but specifically that the bridging market has never been so buoyant. This is a trend he agrees will progress into Q4 and beyond. Berry explains: “Recent studies suggest brokers have increasing confidence about bridging as a product, and the level of competition amongst emerging and existing lenders means the rates and [loan-to-values (LTVs)] are the most competitive ever. “The demand for bridging loans, as well as their improving reputation, means that Q4 will continue to see excellent levels of transactions.” Emily Machin, head of specialist finance at Precise Mortgages, thinks that activity during the next quarter will be more focused on regulated bridging than the non-regulated side of the market. She says: “Regulated bridging will speed up, as people do not want to lose their dream homes, and the cost of short-term lending is at an all-time low, so bridging could appeal as a solution.” With an 8.4% increase in UCAS applications in 2021, there could also be a revived appetite for purpose built student accommodation (PBSA) going into the next year. Not only can bridging be employed to help with site acquisition, but it can also be used during the development exit, while the income from a new-build site stabilises over the new academic year. Chris Oatway, director of LDNfinance, says: “This could be further fuelled by a return of more international students as the effects of the pandemic become more distant.” In a bid to stand out from the competition and attract a slice of bridging business, Berry believes lenders have had to be more innovative. That has meant taking a more positive approach to the products they design, the processes they employ, and crucially, the rates they charge. Berry says: “Brokers and their clients have benefitted from the incredibly competitive rates on offer, and with no sign of competition cooling off, nor of demand www.sfintroducer.com
for property reducing, the ingredients are there for an even more active bridging market ahead.” CONVERSION OPPORTUNITIES Mendes suggests that landlords may be reviewing their portfolios ahead of making changes in the near future. For example, he points to commercial retail units that have remained vacant as a result of changes wrought by the pandemic and subsequent lockdowns. With rules around permitted development rights (PDR) making it easier to convert these disused commercial properties for residential use, and tenant demand remaining stronger than ever in most areas, barring perhaps Central London, this may also fuel the short-term lending market over the coming months. He says: “We are seeing an increased demand for bridging loans, to renovate and sell within three to six months and benefit from the continued property value increases. PD has also been a contributor to this, and I expect to see this continue. “The continued easing of criteria and rates means funding in Q4 will become more accessible than ever, and the opportunities for clients will remain strong.” Moving forward, Mendes believes more developers will look to capitalise on these opportunities, for which bridging could be the perfect tool. He says: “Following the side-effects of the pandemic and changes in habits, we are starting to see an increase in the change of usage with the help of PD, as investors look to capitalise on the residential market and increase in property and rental values. “With property prices continually increasing and out of reach, we have seen several clients looking to purchase at auction – taking on more complex projects – to then bring the overall uplift and property they desire, which they may not have been able to afford based on the current prices.” BIDDING WARS Indeed, an area of the property finance market that has grown during the pandemic – and for which bridging is particularly well-suited – has been auction purchases. Property auctions in the UK have soared in popularity in general in recent years, with 2020 seeing nearly 40% more property by value sold at auction compared to 2019, says Mohammadian-Molina. During lockdown, many auction houses had to make the move online, which has now had the effect of making them more accessible – and therefore popular – among a wider range of purchasers, the majority of whom are unlikely to have the cash up front, and therefore could use a bridge in order to pay within the 28-day timeframe. Berry also refers to auctions, explaining that clients often seek new challenges as they enter a new year, so it is common for the auction houses to be busier in Q4. He says: “Experience shows me that savvy investors have been using bridging funding for years, and → OCTOBER 2021
MARKET XXXXXXXXX crucially they see the product as a solution which creates wealth rather than an unwanted cost.” COST OF COMPETITION While a thriving market is no bad thing, Oatway raises questions around when lenders might bottom out on prices, with a growing number of market players attempting to increase their share of the market. There is little indication that the bridging market will slow down over the next quarter – or longer – and with cheaper funding lines being made available, Oatway expects to see more lenders joining the ‘race to the bottom’. Rates cannot go down much further, however, as it is imperative that lenders maintain a healthy profit on their loans to keep their business in a strong position in case the market turns, he explains. In addition, the challenge the market is facing at the moment is speed of completion, as valuers and solicitors struggle to deliver as fast as borrowers might expect from a market with a reputation for fast solutions, Oatway explains. While competing on rates is one way in which lenders are trying to grow their market share, Oatway adds that many are also considering new product areas in order to build their loan books outwards – for example, refurbishment, development, regulated and term products. Areas such as refurbishment and development have their own problems that lenders will face in Q4 2021, however. For example, the rising cost of materials, as well as build times and the availability of labour. Machin believes that, for this reason, the nonregulated bridging market may move slower than before, heading towards the end of the year. GOVERNMENT SUPPORT One of the key developments that will shape the final quarter of this year is the wrapping up of both the stamp duty holiday and the furlough scheme. In addition to fuelling activity and propping up the mainstream sector, the stamp duty holiday has created high demand in bridging, particularly on the regulated side of the market. Meanwhile, the end of the furlough scheme has some commentators concerned that unemployment levels – so far seemingly less extreme than might have been expected following the challenges of the pandemic across many industries, particularly leisure and hospitality – might see a spike in the final quarter of the year and on into 2022. Mohammadian-Molina expects that once these forbearance measures to support businesses and homeowners come to an end, there could be a negative impact on the residential property market and consequently also on bridging. Nevertheless, in recent months, the market has continued to show significant momentum. www.sfintroducer.com
Mohammadian-Molina says: “For example, the house price bounce back in August was surprising, because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market, but it did not.” However, she adds: “It is hard to say how the ‘tapered’ end of the stamp duty holiday and the furlough scheme will impact the bridging market, and what will happen to the bridging market once stamp duty goes back to normal across the country. “But one thing seems to be clear, and that is the importance of bridging loans as a vital tool for speedy investors who need to move quickly to secure a good deal.” Mendes anticipates a natural slowdown on the back of the conclusion of the stamp duty holiday and furlough scheme. However, he adds: “When one door closes another one opens; we will start to see the side-effects play out and more properties enter the market.” “For those affected by the scheme coming to an end, this could result in repossessions, but I would not expect to see this outcome until Q1,” he says. Mendes expects to see an increase in unemployment figures as furlough comes to an end, but with estimates of between 1.1 and 1.6 million people on furlough when it concluded, and the number of job vacancies over one million and above pre-pandemic levels, there is still some space for the situation to settle. Towards the end of the stamp duty holiday, there was spike in the number of completions due to the rush to ensure the tax saving could be made. Oatway believes that transaction volumes in the next few months will likely not be as high as seen earlier in the year, but he expects the market to remain strong in most areas. Unprecedented demand has led to a shortage of housing stock, particularly as the volume of hopeful buyers reached a peak in the few months leading up to the end of the stamp duty holiday. Meanwhile, while rising unemployment is not something to be wished for, Oatway explains that this could create pockets of further opportunity, with the bridging market ultimately benefitting. He says: “If unemployment figures are released post-furlough and are at 10% to 15%, we could see plenty of opportunity from investors to take advantage of individuals and businesses having to sell quickly. “Any fluctuations up and down in property market will often lead to higher transaction levels, which result in the bridging market remaining buoyant.” GROWING SOPHISTICATION Only a few years ago, a bridge was a standard product aimed at tackling the period between a house purchase and a delayed house sale, and was offered mainly by high street banks. However, bridging finance has developed as a solution in its own right, and is → OCTOBER 2021 BRIDGING INTRODUCER
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MARKET XXXXXXXXX now often the funding of choice for sophisticated borrowers and professional property developers, for instance looking to secure a land purchase while they obtain planning for its development, or to carry out light refurbishments on a property. Mohammadian-Molina believes that borrowers in the bridging market are continuing to become more sophisticated and knowledgeable, and therefore more demanding, which will shape the market in the final quarter of this year and beyond. She says: “The bridging market has also become a lot more competitive, with an increasing number of participants in the market.” As a result of the greater choice of lenders, borrowers – and the brokers who guide them through this market – have also had to up their game and become more informed. Greater choice requires a better understanding of what different lenders are offering. Berry goes on to say that bridging loans have always been a good tool for clients wanting to purchase a property that is in some state of disrepair, and which they would not be able to raise a traditional mortgage against. This is particularly the case in the buy-to-let (BTL) market, allowing savvy landlords to increase their yield by buying a property in need of work, taking out a bridging loan in order to tide them over until they can benefit from greater rental yield once the property is outfitted to a higher standard. Berry says: “Bridging lenders are well acquainted with these bridge-to-let cases, and so are perfectly placed to deliver the funds that make the purchase a possibility.” As well as this, Berry believes that the relatively new concept of a dedicated bridge-to-let product offers investors certainty, because they have an exit route from the initial bridging loan already worked out. Whether it is landlords looking to chase higher yields and cater for changing tenant desires, residential purchasers looking to speed up a transaction or make refurbishments, or any of the myriad other types of property investment, bridging can offer a wide range of solutions. This is only going to take it from strength to strength through the rest of this year and beyond. Oatway believes that the demand for high gearing at low rates will always be the main pressure in the bridging market, but that what truly matters the most is the flexibility bridging finance is able to offer, and the security of knowing that a lender will deliver. Despite ongoing issues with turnaround times, which have yet to fully resolve, Oatway says: “We find that clients are open to using bridging finance now more than ever, and the industry has a good reputation among property investors and developers.” However, this does not mean that the market can rest on its laurels, and Oatway says that flexibility and high levels of service will need to continue and www.sfintroducer.com
be a focus for lenders, to keep the market going in the right direction. To do this, he says, it is imperative that lenders continually review their processing and systems to ensure they are as eﬃcient as possible. Machin agrees: “What borrowers need from lenders is flexibility, but with speed still being at the heart of the service we provide.” THE YEAR AHEAD Spring is considered the best season to achieve a fast sale, with the late autumn and winter months ranking as the slowest. Mohammadian-Molina notes that in March, properties took 57 days to sell, while in October through to November they took a much longer average of 79 days. She says: “This trend is mirrored in the bridging market, with the end of the year tending to be much slower in terms of applications and approvals. “However, this trend might differ in Q4, amid factors such as labour and material shortages.” Machin expects that demand for rental properties and the need for more homes will be an invaluable part of the growth of both this and the mainstream market when looking beyond Q4 and into 2022. She adds that the main focus around this time of year would normally have been non-regulated bridging, with many developments looking to complete and get people moved in before Christmas. However, with materials shortages, and high demand drawing the focus back towards residential bridging, this does not appear to be the case for the remainder of 2021. With the recent relaxation to permitted development rights, she adds: “One would have expected an explosion of refurb and change of use developments, but of course this is not a typical year. “The good news is that we are seeing positive signs and developments are starting back up again.” So, looking ahead to 2022, perhaps the nonregulated side of the market will return to focus as the issues facing it ease, while residential bridging might mellow in the wake of the stamp duty holiday’s end and the relaxing of current high levels of demand. For the rest of this year, at least, Oatway does not predict a lessening of the busy period that has been experienced throughout the pandemic within the bridging industry. He believes that there is vast opportunity in the market right now, catered for by an array of funding options for clients of all levels of experience, which means that the bridging market will remain strong for the rest of 2021, and on into the next year. He concludes: “With the Bank of England base rate expected to stay at rock bottom levels for the foreseeable future and plenty of appetite to lend, I can see 2022 being a solid year for the industry.” B I OCTOBER 2021
BRIDGING AND COMMERCIAL
Opportunities for growth Jessica Bird outlines the discussion at Bridging Introducer’s recent round-table, which looked at the evolving commercial market post-pandemic, and what players need to know as the bridging and commercial space becomes more competitive
he COVID-19 pandemic has caused many shifts across UK public’s relationships with work, retail, and even one another. From technology revolutionising social lives and work interactions, to online retail becoming the norm and people waving goodbye to the daily commute, there are an array of trends that are going to shape the property market for many years to come. Bridging Introducer’s most recent round-table brought together experts from Precise Mortgages, Sancus, Crystal Specialist Finance (CSF), the Financial Intermediary and Broker Association (FIBA), Together, LendInvest, Finance 4 Business, Assetz Capital and First 4 Bridging to discuss how these cultural shifts might change the world of bridging and commercial finance. COMMERCIAL TRENDS For Emily Machin, head of specialist finance at Precise Mortgages, the main space in which the effects of the pandemic have played out is in the high street. “High streets have really been destroyed during the pandemic,” she explains. “Personally, I think it was always going to happen as consumer needs evolved – but the pandemic has probably made it happen a lot quicker than any of us expected.” However, while many household names have faltered, others – and particularly those with an online presence to fall back on during lockdown – have fared well. Machin notes that this means secondary and tertiary retail properties have performed strongly. “People have really changed their shopping habits, gone more local, and those are the areas that have really outperformed what we expected,” she says.
“Alongside that, warehouses, distribution centres, and those kinds of industrial units are doing really well, as businesses have expanded and need areas for stock.” Lorenzo Satchell, specialist key account manager, London and South, at Together, agrees that the pandemic brought forward a longer-term trend, saying: “The demise of the high street has been there for some time, it’s just that COVID-19 has accelerated it.” As a result, Satchell expects to see an upsurge in more social, mixed use spaces in place of the traditional retail-focused high street. For example, he predicts an increase in bistros and cafes, with residential in the mix as well. Similarly, with an increase in remote or hybrid working patterns following the success many businesses found changing their working practices out of necessity during lockdown, office space is likely to see a change. Laleta Buctkuar, relationship director – bridging and intermediary at Assetz Capital, says: “It’s unclear what the future is, but certainly you’re seeing a change to the types of tenancies that landlords are looking at, going away from longer-term leases and looking at shorter
“If housebuilders can’t fulfil their quotas with houses, the next step is developing commercial units into residential” EMILY MACHIN
BRIDGING AND COMMERCIAL
“You’ll see properties with diverse income streams around them, and that’ll have big impacts on the way the lenders have to manage those assets through the term of a loan” RICHARD WHITEHOUSE tenancies for offices, as well as accommodating the WeWork pattern of sharing office and desk space.” CREATING CONVERSIONS Of course, the move away from full-time office space, as well as spurring on change in how offices themselves are laid out and leased, has opened up potential opportunities for conversions. With permitted development rights (PDR) paving the way for easier commercial to residential conversions, James Danks, head of bridging and development at Finance 4 Business, says that there are some key opportunities for the future here. He explains: “The change in working dynamics means we can then use those spaces to meet the shortage of residential properties, which I think is a great opportunity for development clients. They can perhaps try and step in and concentrate on conversions and PD schemes.” Machin warns, however, that this could cause issues later down the line around a lack of supply for those business that do want to utilise more traditional office spaces, and notes that it is still unclear how the pandemic will change things long-term. Nevertheless, she adds that this could be the solution to an ongoing issue with the supply and cost of materials within the development market. Machin explains: “There is a massive housing shortage, but there is a massive materials shortage as well. So if housebuilders can’t fulfil their quotas with houses, the next step is developing the commercial units into residential. That’s a lot easier to do than building a whole new-build site.” Buctkuar agrees that this is something that has come into the fore due to the relaxations of PDR, while Richard Whitehouse, director of Sancus, says: “PDR planning laws are making this easier to do, particularly if you are [a small to medium (SME)] developer. The challenge to acquire land at a price that allows you to be profitable is a big one at the moment. “Planning processes are pretty slow, because councils are hiding a bit behind people working from home, and it can be quite slow to get professionals moving even now as we’ve relaxed into slightly more normal times. “So it’s quite attractive project to pursue – both for office block owners and for developers. If you’re a www.sfintroducer.com
developer, it’s a quick hit for the planning laws, and a quick route to revenue.” Bringing a number of these trends together, Satchell notes that the future might see an increase in semicommercial properties. “There’s a lot more semi-commercial assets that are being acquired in the market at this moment in time,” he says. “These have the risk of commercial but the surety of residential – the mix of the two works really well and it’s a good blend.” Adam Tyler, executive chairman of FIBA, adds that this is not simply a case of combining residential and commercial spaces, but also leisure, bringing together all of these elements into a more lifestyle-focused space. “If you prepare buildings like that, that might bring people back into the centre of towns and regenerate and change old buildings, from big old Debenhams stores to smaller units that might be able to go into different premises.” Richard Bond, head of compliance at CSF, says: “We are seeing customers become more focused on the outcome, rather than price-driven, which obviously does help when you’re dealing in the short-term market. “We are also seeing a number of clients opting for office conversions, seeing the benefits in the capital growth of converting commercial into semi-commercial with a residential element. There’s definitely more brokers dabbling in that market space.”
“We see brokers that have no experience within the specialist lending market, that send us enquiries that sometimes don’t go anywhere because they don’t understand what’s required” STEVE SWYNY SPECIALIST EXPERTISE No matter what trends, or what combination of changes, the future holds, the fact remains that it is in the specialist market that the power to fund these opportunities ultimately lies. Tyler says: “You cannot change the face of the high street without specialist property finance. The buildings that already sit there within the high street – whether they’re retail or part office, part residential – if you’re going change the structure of those, the only place to actually get the funding is through specialist lenders who understand that market, see what the future is going to look like, and are prepared to lend on it.” However, while the specialist market houses the prior experience to maximise on these complex types of → OCTOBER 2021 BRIDGING INTRODUCER
BRIDGING AND COMMERCIAL
“You cannot change the face of the high street without specialist property finance. The only place to actually get the funding is through specialist lenders who understand that market” ADAM TYLER investment, this does not mean that these lenders do not also need to learn and adapt. Whitehouse says: “One thing you’re going to see is lenders are going to have to take a much more nuanced approach to valuations and the properties they’re lending against. “You’ll see properties with diverse income streams around them, and that’ll have big impacts on the way the lenders have to manage those assets through the term of a loan, particularly short-term lenders. “They’re going to have to be skilful and agile in the way they do things.” Buctkuar agrees that there has to be an element of adaptability to accommodate the diverse kinds of properties and changing consumer demand as the market moves forward post-pandemic. Tyler says: “At the moment there is a dearth of term commercial lenders out there. It’s very difficult to find a term commercial mortgage for a lot of good tenants, certainly in anything to do with hospitality or offices. “Predominantly, high street and challenger banks have been bogged down with CBILS and Bounce Back Loans, so as you start to come down the pyramid and see who can do long-term mortgages, and throw into that the strength of the tenant, it’s difficult unless that business has shown very good accounts.” This uncertainty and lack of available long-term money may well leave space for bridging lenders to move further into the BTL market, which Tyler adds is a trend already being seen to an extent. Gary Clark, senior business development manager at Lendinvest, adds that due to the growing opportunities in this field, there are new brokers coming into the semi-commercial space, and that market players have a role to play in making sure this runs smoothly. “From the bridging side, there’s a lot of education needed where you’ve got resi brokers who are very
BRIDGING INTRODUCER OCTOBER 2021
much trying to look at expanding what they do, particularly on the commercial side,” he explains. “We’re happy to hold their hands on initial enquiries where it’s new to them, and really try and establish what they’re looking to do, what their client is looking to do, and provide an educational piece throughout, which is important for all concerned.” He points out that for bridging in particular, the most important thing for brokers to focus on, regardless of the property type, is helping the lender have a clear understanding of the exit route. Bond adds: “The more people that are in the market, the more it drives competition. From a packager point of view, at Crystal we offer different levels – for less experienced brokers we’ll hold their hands from start to finish, and for more experienced ones they can be involved as much as they want.” Satchell adds: “There is one sentence to summarise all this is: choose the right partner. Whether that is lender to packager, or broker to packager, choose a partner that has the right experience in the field. “The specialist market is going to be a fundamental part of driving the supply and demand factor forward.” Steve Swyny, commercial director at First 4 Bridging, agrees that the focus in this market must be on education, and choosing the right businesses to partner with. “We see brokers day in, day out, that have no experience within the commercial or specialist lending market, that send us enquiries that sometimes don’t go anywhere because they don’t understand exactly what’s required,” he continues. “So we try and educate these brokers – unless you educate new brokers entering the market, they don’t have the experience that those of us who have been in the industry have in placing these cases and looking for solutions.
“We’re on the verge of a potential boom with regards to the bridging market, certainly long-term we’re going to see that” LORENZO SATCHELL
BRIDGING AND COMMERCIAL “Making sure that you have the right partners, and that brokers know where to look, is probably up there as the most important thing.” Buctkuar adds: “Bridging is not that transactional, it’s a journey that the borrower embarks on to get to their final destination, so it’s absolutely key to have those right partners, who can navigate enquiries to make sure that the broker is under no illusion about what an in-depth assessment needs to be had.” For the semi-commercial or commercial space, she adds, this includes gaining a deep understanding of how a business in question has performed over the past 12 months, and how it has adapted to the changing world, economy and market. “Some of these factors are unfamiliar in the standard residential market, where cases are more transactional,” Buctkuar explains. Machin notes that a lack of face-to-face interactions over the pandemic may have made it harder for newer entrants to pick up nuances. Tyler says that the influx of new brokers entering the market, while it brings with it this need for increased education and support from more established market players, is an important source of young blood that might revitalise this space. To this end, FIBA has been working with the London Institute of Banking & Finance (LIBF), looking at how the industry might implement a more codified approach to education, such as an official course that provides background to help those that enter this market. “It’s one of the strengths of this industry, that we all work together to try and help new people,” he adds. “Others might leave someone on their own, but we don’t, we embrace and help everybody.” OPPORTUNISTIC CAPITAL Bridging finance also has a wider role to play in the future of the UK economy. Danks says: “In terms of business recovery, over the past 12 months we’ve seen quite a lot of companies that perhaps might be pretty new or may have had a blip in trading for obvious reasons. “We’ve worked closely with a chosen bridging lender, given that company maybe 12, 18 or 24-month period in certain instances to get back on track and start building profits up to a more acceptable level, where they can then look to go for a longer-term facility. “Certain clients may have credit blips that mean they can’t get access to the right rates on longer-term
facilities, so we’ll arrange a bridge to give them six months for things to then come off their credit report.” Considering the disruption over the past year and a half, this kind of situation is only likely to become more prevalent, as income streams are more complex, and payment holidays or credit blips have become far more the norm, often through little fault of the borrower’s. Whitehouse points to the importance of these options for SMEs in particular, which form an integral part of the UK economy. “I think we underestimate sometimes just how complicated an environment it is for SME business owners to find their way to funding,” he explains. “The industry does a great job of helping them with this. In terms of recovery, our job as lenders is to provide quick access to opportunistic capital –
“From the bridging side, there’s a lot of education needed, where you’ve got resi brokers trying to look at expanding what they do, particularly on the commercial side” GARY CLARK whether it’s projects that have got quick returns and allow companies to go and invest and get themselves up and running, or just giving them time to navigate that non-bank market. “Long gone are the days when the high street banks were even remotely interested in SME businesses. The way their capital and operational costs are structured just doesn’t allow them to service that community properly any more.” Tyler says: “Something we need to do as an industry is make the SME sector aware that we exist over the next four or five years.” PREPARING FOR GROWTH Over the course of the pandemic, the bridging market has seen an acceleration of a previous trend, in which it moved out of the realm of last resort, and has steadily become known as a regular, useful and reliable tool. As bridging has become better established and more widely understood and used, spurred on by high →
BRIDGING AND COMMERCIAL demand and competition, the market has grown. This has also seen rates drop, making for more appealing deals for many borrowers, though it has had a less positive effect on completion times. Tyler says: “The money needed to repurpose buildings, or help SMEs recover, is going to come from the specialist market, and what’s happened with challenger banks and high street banks is the cost of funds and amount charged to lend money out has had to come down to remain competitive. It has to stay at that level. “When I first started being involved in bridging, 1.5% a month was a bargain, now with sub-0.5% for the right kind of deal, it’s all about more professionalism, increased the amount of bridging that’s actually being done, and long may it continue.” While factors such as the rounding off of the stamp
“In terms of business recovery, over the past 12 months we’ve seen quite a lot of companies that might be pretty new or have had a blip in trading for obvious reasons” JAMES DANKS “
duty holiday may mean a slight lessening of the pace the bridging market has seen recently, the overall trajectory of growth looks set to continue long-term, which is something lenders and other market players must prepare for. Satchell says: “The key thing is going back to that point about education. As specialists, educating our key partners, and in turn those key partners educating their clients.” Clark adds that technology is going to play an increasingly important role as this market grows, saying: “When you bring up technology, it can almost sound like you’re trying to take out the human touch. That’s not something we’re trying to do, but with some bridges – certainly straightforward residential, something that’s pretty transactional – technology can help. “Technology has a huge part to play in simple residential bridging to speed up the transaction for everybody concerned.
“Companies that have invested in that will have a headstart with some of the newer entrants who are just finding their feet.” Whitehouse agrees that, as this market grows, borrowers want speed of deliverability, flexibility and to be rid of hassle, which is something he has seen come to the fore in particular over the course of the pandemic, which helped market players realise the extent to which digital processes could be implemented with great success. He says: “Whether it’s something as simple as know your client [KYC], all the way through to assessing the viability of the assets you’re lending against, if you can take some of that stuff out and provide answers quickly to borrowers, it’s going to be a key advantage for lenders over the next two or three years.” While agreeing that technology is an important element, Machin asserts that in the specialist market, it is all about finding a balance. “There are things that will never be able to be done with technology,” she explains. “You can see that when you look at a basic residential like-for-like remortgage – there is all this technology available and that is still a challenge to nail. I don’t ever think that tech will take over particularly in the bridging and commercial space, but yes there are things that will make life easier.” Clark adds that, particularly with young blood coming into the industry, it’s about providing choice, rather than restricting people to go down a particular route. For Tyler, technology also has a helpful role to play in the future regulatory landscape, for example with time-stamps allowing for greater transparency, which is already the case in the mainstream market and may become more important for specialist lenders. In terms of lengthening completion times, Danks says it is important for businesses in this market to diversify what they do: “We all saw how busy solicitors became when the stamp duty holiday came in, which slowed turnaround times down. Lenders have brought out new products or different processes, automated valuation models [AVMs] – it’s about identifying how we can make the process as swift as possible, making it easy for that end consumer.” Swyny adds that the onus does not entirely lie with the lender to ensure things move quickly, and that this must be a collaborative effort. “It’s about making sure that the lender has the right information,” he explains.
BRIDGING AND COMMERCIAL “If you’re sending off documentation which you know has information missing or is not what the lender requires, that’s going to slow things down. “So it’s educating the consumer and the broker around what they need to send in to get the deal done as quickly as possible.” FUTURE LANDSCAPE With the stamp duty holiday now over, having seen a tapered end in order to avoid the cliff-edge feared at the time of its initial deadline, some have argued that this might cause a dip in demand and activity. However, Buctkuar says: “I don’t think there’ll be any long-term issue. Investors and borrowers will still go back to using bridging as they did prior to those reliefs being put in place. “What you’ll probably see is the purpose of borrowing changing – moving from purchases slightly to generating opportunities for greater yield. We’ve already mentioned conversions or changing BTLs to houses in multiple occupation [HMOs], taking greater advantage of office space and the tenancies within that.” Satchell agrees: “Developers and investors will continue to do their day jobs, they’re going to look for opportunities, whether semi-commercial or commercial, conversions from commercial to residential – they’re always going to be looking for those opportunities. “We’re on the verge of a potential boom with regards to the bridging market, certainly long-term we’re going to see that going forward.” Whitehouse mentions that where the market might see a slowdown post-stamp duty holiday is within regulated bridging products, which grew substantially under the influence of the incentive. However, he agrees that on the non-regulated bridging side, there have been few signs of any slowdown, with appetite for investing in real estate remaining strong.
“What you’ll probably see [poststamp duty] is the purpose of borrowing changing – moving from purchases slightly to generating opportunities for greater yield” LALETA BUCTKUAR
“Unless you educate new brokers, they don’t have the experience that those of us who have been in the industry have in placing these cases and looking for solutions” STEVE SWYNY Tyler agrees, saying that the next five years for specialist finance are set to be highly positive. In terms of broader future trends, Whitehouse notes that changing town centres and high streets will be something to watch. “I suspect these will become places to meet and do things, rather than buy things,” he explains. “We’ll see an increase in the repurposing of buildings, even just the ground floor, to create event locations and places to meet. We’ll see much more combined spaces. “As a lender, that means wrapping your head around the different types of revenue generated by those assets. I think lenders will start to look more at the usability of the space, rather than the people that occupy it, to determine the quality of income.” With the online retail market growing, Satchell predicts that warehouses and industrial units will continue to trend in terms of acquisitions, while Buctkuar notes that at Assetz Capital has certainly picked up on this trend. While there may be peaks and troughs in certain areas of the market, and while issues with construction materials – for example – may continue, from a development and refurbishment point of view, Buctkuar also predicts continued strength in the future. Machin says that the semi-commercial space will continue to take off through the rest of 2021 and into 2022, with owner-occupied properties becoming an increasing area of focus, as those with premises look to buy them and take on the security of the rent on upper floors as well. Across the board, whether in terms of ensuring clear contingency planning for developers, shortening lengthened turnaround times by improving processes, or facing a new normal for the UK’s high streets and city centres, the message is clear: education, collaboration and understanding are key. B I
OCTOBER 2021 BRIDGING INTRODUCER
A precision approach Jessica Bird speaks to Emily Machin and Adrian Moloney about how Precise Mortgages has fared throughout the past 18 months, and what is in store for the future Bridging Introducer last caught up with Precise Mortgages before the pandemic fully hit. How has the business fared? Adrian Moloney: Like every business, we had to adjust to the pandemic. We quickly had the vast majority of staff working remotely, delivering technology to keep the business going. From a sales point of view, we did a pretty good job of being proactive while working from home utilising screen-based tech and proactive telephony, and continuing to provide access to the underwriting teams to make sure brokers could be supported. There was a small period of time where valuations weren’t possible, and we adopted some desktop solutions. Thankfully, it was only for a short period, and valuers got back out on the road pretty quickly. We took a controlled approach to business volumes, managing capacity in terms of how much teams were able to process working from home compared to working in the office, but we had all of our product lines open, from bridging through to long-term residential and buy-to-let (BTL), for example, which is fantastic. A lot of our product lines are now back to their pre-pandemic criteria, having absorbed the challenge. Most importantly, from our brokers’ point of view, we’ve been able to get our sales teams back in the field from the moment it was safe to do so. As we go into the final quarter of 2021, the business is in great shape to tackle challenges and opportunities. We’re excited about how Emily’s team can support the bridging market going forward. How has the bridging market as a whole fared during the past year? Emily Machin: Lenders had to reconsider where they were in the market when it came to bridging. Gradually criteria rose back up again, and we’ve got our lending lines open for bridging across regulated and non-regulated. Obviously, the stamp duty holiday has helped the regulated side of things quite massively; we saw
BRIDGING INTRODUCER OCTOBER 2021
that with the completions at the end of March, and we’re starting to see that again coming to the end of September as well. The non-regulated side is still a bit of a challenge across the whole of the market, and it’ll take probably into the first half of next year to understand where non-regulated bridging plays in the market as a whole. The positive thing is that we’ve seen a lot of new lenders come to market, which is great because it encourages competition, and it makes the market a lot more buoyant. AM: We’ve also seen a lot of lenders almost going into a bit of a price battle and competing for business. It’ll be interesting, as we come out of the stamp duty holiday, to see how buoyant the purchase market will be, because one of the issues at the moment is a compression on the amount of stock. I think we will continue to see a very competitive bridging market in terms of pricing, as people vie for that space. We’re lucky as a business, having quite a diverse product set and product lines, and because we are a bank that does bridging – not wholly a bridging lender – so we have the opportunity to flex our muscles in different product lines. You’ll still see a very competitive market as lenders drive business to their development brands. EM: That potentially opens up other non-regulated opportunities as well. Housing stock is depleted, and potentially will be for the rest of the year, but the properties on the market are ones investors can use as an opportunity for light refurbishments. AM: To back that up, we see that investor appetite in BTL hasn’t diminished. Actually, it has been a really strong year for the buy-to-let area, and that’s a really important part of the bridging market, as investors perhaps look at opportunities around buying an asset that needs work in order to make the investment as good as they can. www.sfintroducer.com
INTERVIEW Is increased competition and an influx of newer lenders always a good thing?
Emily Machin and Adrian Moloney
EM: That’s where the value of a good broker comes in. There are loads of different options for customers right now, and it’s about finding the right deal and managing expectations. Yes, there might be a deal with the best rate, but you’ll have to take a hit on service; as long as the broker is good enough and understands that, then competition in the market is a good thing. We are happy to deal with people who aren’t doing bridging day in, day out, because we’ve got the expertise in-house that can help talk them through. Again, that’s where Precise Mortgages being an established bridging lender will always help the broker. AM: We’re a really established player in this market and pride ourselves on our reputation for doing things right, not just in terms of the products, but in the way we deal with the customer. Precise Mortgages has always spearheaded good behaviour in the market, and we have so many resources, including an in-house real estate team, to give us insight into how that sector of the market is going, so we get the right terms for the borrower. It’s about delivering positive customer outcomes. The combination of One Savings Bank (OSB) and Charter Court Financial Services happened not long before the pandemic struck – how has the business fared and changed as a result? AM: The results have been really positive. Bringing two really good business together is a big plus. We became a bigger, stronger business overnight, and it’s gone really well. These were two businesses with strong cultures, and which were very much respected. There is clear diffraction between the brands, so they complement each other. Under the Precise Mortgages brand, it’s very much about efficient decision-making, at Kent Reliance for Intermediaries it’s a bit more tailored, and InterBay Commercial is that commercial complex BTL, handholding deals that really need in-depth expertise. From the broker’s point of view, I think they’re really pleased that we’ve maintained that individuality, despite being part of the one group. The integration is proceeding really well, and the first half of 2021 remains ahead of schedule. As a sales function, we made some changes at the start of the year which set us up nicely for the market ahead. We combined expertise and set up a specialist finance team, which specialises in bridging and www.sfintroducer.com
commercial, and has dedicated support there as well. One of the learnings I think that we have had is about widening out that telephony support to brokers, having more access to support – both reactively and proactively. We are in the throes of looking at what our telephony looks like in 2022, which is the next exciting part of our journey in terms of providing even better support to our brokers and customers. One of the things that COVID-19 taught us was that you don’t necessarily have to be in a broker’s office to do business, and that you can pick up and support brokers that perhaps wouldn’t be on the radar for a field-based business development manager (BDM). If you’ve got a BDM who’s in four appointments in a day, out in the field and travelling, actually a quicker way of dealing with some challenges and enquiries is to have someone at the end of the phone. That’s a real positive step for us. Rest assured, we are nimble brands that move and adjust quickly, and there are more exciting things ahead in terms of our proposition, products and offering. EM: We viewed it as a great opportunity to really consider and establish best practice right from the beginning. It’s been a really interesting and collaborative process, with plenty of conversations and discussions which brought about a strong feeling of unity right from the start. → OCTOBER 2021 BRIDGING INTRODUCER
INTERVIEW I think the pandemic helped in some ways, as everybody came together and found a new way to work together. I was impressed and really proud to see how we handled it. My team are a mix of Precise Mortgages, Kent Reliance for Intermediaries and InterBay Commercial, and they all work together with the same goal. That is true across all the brands now, which has been really good to see. AM: This is a sizeable business, and if someone has a deal that doesn’t fall in with Precise Mortgages, they’ll refer it elsewhere in the business. We work well together, keeping in contact with one another during the pandemic and making sure everyone was kept abreast of what was happening right the way across the different brands. The reason both businesses were successful before, during and through where we are now, is that we’ve always listened and will always continue to listen to what our broker partners tell us, and will continue to support them, because ultimately, they are our customer. Making sure we treat them right and provide the right levels of service, and have the right proposition out there, is the reason that this business as a whole is a success. What are some of the core values that have underpinned your approach to recent challenges? AM: One of the things we’ve done right the way through the past 15 months is that we’ve managed to weigh our risk in the right way. We’ve got a healthy balance sheet, and you don’t want to distort that, but we’ve also managed from a capacity point of view. I’ve seen a lot of lenders out there which have gone hell for leather, and service levels have gone down. That doesn’t help anyone. We’ve handled the stamp duty deadlines really successfully, got completions out the door, and managed to help people get the house of their dreams. It’s not all about having lowest rate and the highest criteria – a lot of brokers like having reliability, good service, consistency and support. If you can provide all of those to your brokers, then they tend to come back and want to use you again. We’ve also got a very experienced senior management team who have all worked in the various businesses for a very long time, which meant we were able to work with our broker partners during the more difficult parts of the pandemic, and we have those ongoing relationships with them. Whilst being bigger, OSB Group still remains flexible and dynamic in its approach to dealing with things, which has put us in a really strong
BRIDGING INTRODUCER OCTOBER 2021
place. That’s why we are where we are today, and in a really good position going into 2022. We are looking at a potentially very eventful Q4 – what key trends are you looking out for? AM: It’s still a very good market for brokers, and bridging will remain strong. It’s an important part of the overall mortgage offering, and it’s a good solution for people in the right circumstances. The brokers we speak to are still busy, and are still getting new enquiries. So, we sit in what is still a relatively hot property market. There’s not that much stock coming onto the market, when it does come on it goes quickly, and people are still looking to buy. I think the rest of the year is going to be pretty good. There doesn’t seem to have been a let up from broker enquiries, certainly not for our team reporting on the ground – they’re very busy and we see that in terms of the enquiries and applications that are coming in the door, and we are in a particularly cheap interest rate environment, which makes things quite appealing to people. As for longer-term trends, we take every day as it comes after the past 15 months, but there are good indicators. There are still challenges – for example, let’s see how furlough unwinds. If you look at the overall employment market, though, all the indicators there are pretty strong – unemployment numbers are nowhere near what was predicted 12 months ago. Yes, there are challenges around inflation, but the UK property market is still particularly active and particularly strong. EM: Looking at bridging and commercial trends, the big focus is on the high street at the moment, and what changes are going to happen there with the permitted development right (PDR) changes. What does the high street look like going forward over the next couple years? I’m of the opinion that the high street was always going to change – it wasn’t sustainable. The pandemic rushed that along, so now what happens to these town centres? Various people are expecting a very European situation, for example, with bistros and outdoor dining – which is all very lovely, but we do live in the UK and it does rain a lot! Opportunities-wise, for bridging, non-regulated commercial and commercial lenders in general, the key will be the high street. AM: When you start to look at the commercial market and the high street, at InterBay Commercial we have very much focused on the tertiary end during this period – out of town, mini parades – www.sfintroducer.com
INTERVIEW various asset classes that performed well during the pandemic. For example, look at warehouses and industrial units, which have performed well. Take arguments about the ‘death of the high street’ at your peril, because as more businesses return to offices city life starts to expand – certainly when I’ve been in London, trains are busy, and there are more people around. Hopefully, as we get back to normality we’ll start to see those city centres come up again. What you are seeing in the areas close to the cities as people return to work is perhaps the younger generation going back and wanting to rent a property that is closer to work, and to the city centre. You’ll see the high street evolve and become much more of a cultural hub, and I think there’ll be opportunities there, and the commercial market will continue to evolve. Will office to housing conversions be a part of helping with housing stock? AM: It can only help. Different people want to live in different environments, and we have seen some move further out for more green space, but for many of these conversions, the ‘for sale’ sign goes up one week and it’s sold the next. There’s still massive demand. EM: I think quality of commercial will be a big thing. People want high standards of living accommodation now, so that’ll be one to watch. Supply is still an issue in terms of materials, though. The big housebuilders are struggling, and it might be difficult for smaller developers to get their hands on what they need. But again, it’s so up in the air, and we need another six months to see what will actually happen. Bridging historically had something of a negative reputation, has this been fully dispelled? AM: Bridging is an important part of the market, and its reputation has improved – in no uncertain terms due to the way in which people like Alan Cleary drove change through the Precise Mortgages brand. The brokers we deal with have the customer at the heart of the outcomes, and we wouldn’t deal with anyone that didn’t. Is there more work to be done? Lenders such as ourselves, with the messages that we put out and the way we work with brokers and customers, make sure that people know that bridging is an ordinary part of the process for many people. The cost of bridging now is also a lot more in line with other products, so it has a very different www.sfintroducer.com
reputation from what it had 10 years ago, that’s for sure. It’s an acceptable and important part of the market, and for those brokers that don’t fully understand the bridging market, or are not used to it, there are good businesses that they can partner up with to access those products. What has Precise Mortgages’ journey been with technology and digitalisation? AM: Technology plays an important role, but people play an even more important role in the specialist market as a whole, and in bridging in particular. We are constantly looking at the type of kit we use, whether we can improve the broker journey, and we will continue to do that as part of the integration of both banks. Having people that brokers speak to that understand the deals and make them happen, that return calls quickly, that are able to help along that process, is just as important as tech in terms of the bridging market in particular. EM: It’s about finding a balance. People want to deal with us in different ways, and it’s making sure we don’t put a barrier in and make it specific to one way or the other. It’s like in the queue at an airport, you’ve got those who have done everything on the app, and those that have printed everything out. It’s very much the same in this industry, people want to deal with us in lots of different ways, and it’s about covering all those bases and not putting restrictions in place. What developments should we be looking out for from Precise Mortgages in the near future? AM: While I can’t reveal the specifics, Precise Mortgages has always been active in making sure its proposition and products are at the forefront of brokers’ minds, and that won’t change. There’s plenty coming down the line – we won’t be standing still. What final message would you like to get across to brokers that haven’t worked with you yet? EM: Get in contact with us! There’s loads of ways you can deal with us, and we’ve got national BDM coverage and a huge amount of experience across all of our brands. We are more than happy to help, however it is that you want to deal with us. There’s lots more to come in the future, as well, so if you don’t know about Precise Mortgages, InterBay Commercial or Kent Reliance for Intermediaries, all that you need to do is pick up the phone and have a chat. B I OCTOBER 2021 BRIDGING INTRODUCER
Two specialist lenders. One expert team. Our team of specialist finance account managers are just that… specialists. With a wealth of product knowledge and industry experience, they oversee the specialist propositions of bridging finance, refurbishment buy to let and second charge loans with Precise Mortgages as well as commercial, semi-commercial, buy to let and holiday let lending across InterBay Commercial – offering the benefit of two specialist lenders, in one expert team. The team are capable of supporting a range of financial needs, and are committed to building long-lasting relationships with our broker partners. Their aim is to find the most appropriate solution possible, working in partnership with you and sharing essential information about our specialist products and lending policy. With a detailed knowledge of the mortgage market, our specialist finance account managers understand the challenges you face and are ready to help with your most complex of cases. So if you’ve got a case in mind, get in touch with your local specialist finance account manager today:
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Information correct at time of print (04.10.21)
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InterBay it. 01634 835006 interbay.co.uk
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0800 116 4385 precisemortgages.co.uk
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Time to exercise caution Vic Jannels CEO, ASTL
think it’s fair to say that the bridging market is in a stronger position now than we possibly could have hoped this time last year. Our own recent lending data show an almost universally positive set of results for bridging lending in Q2 2021, with completions increasing, applications remaining strong and defaults falling. However, it is also important that nobody in this sector gets carried away with the progress that we have been able to make so far. The furlough scheme is now over, and while the government’s job retention scheme has been a “huge success” in saving jobs – according to the Resolution Foundation – rising unemployment is still on the cards. Citing figures from the Oﬃce for National Statistics (ONS), the Resolution Foundation has estimated that hundreds of thousands more workers could be looking for new jobs following the end of the furlough scheme on 30 September. Within the report, Dan Tomlinson, senior economist at the Resolution Foundation, said the furlough scheme had been critical for protecting people’s living standards. He said: “The scheme has prevented the UK experiencing catastrophic levels of unemployment, and its
Let’s not take our eye oﬀ the ball.
extension to 18 months – at a cost of £70bn – has been worth every penny.” However, he added: “Britain is set for a bumpy autumn, as the end of furlough coincides with rising energy bills and the £20 a week cut to Universal Credit.” There has, of course, been much said about the number of job vacancies in the UK hitting a record high of 953,000 in the three months to July, according to the ONS. However, a report by the Institute for Fiscal Studies (IFS), has said that these vacancies are primarily being driven by employers struggling to recruit low-paid workers, while vacancies in other areas are still significantly below pre-pandemic levels. The report said that new job opportunities remain more than 10% below pre-pandemic levels for a quarter of the workforce, which is about eight million people. While the number of new job openings for low-paid work was about 20% higher than before the start of COVID-19. My intention in raising this is not to pour cold water on the economic recovery, which is undoubtedly encouraging. It is, however, to highlight the importance of continued caution amongst bridging lenders when it comes to processes, pricing and underwriting. We have covered previously the ongoing potential issues regarding secret and half-secret commissions, and the importance of lenders working together with intermediaries to ensure that there is no gap in processes and documentation that could lead to
clients experiencing any sense of ambiguity in the commissions that are being paid. As customers come under more financial pressure, they are increasingly likely to look for areas where they can pick holes in their agreement with a broker or a lender, or maybe both. So, it is important that we move into this period while exercising caution – for the benefit of our businesses and our reputations. This doesn’t stop at commissions being paid. In a recent legal case, where a customer was looking for reasons to be released from the commitment they had made in taking the loan, they argued that they had been let down by their broker and had been unable to refinance at the end of the term of the loan. We all know that the exit route is key when it comes to bridging. We also know that bridging loans can be harder to secure in more challenging economic environments. While there are many positive signs for the economy today, there is still a cloud of uncertainty on the horizon, and it is diﬃcult to know in what environment a loan that originates today will need to redeem in six or 12 months’ time. Again, caution is recommended when it comes to brokers placing their clients with solutions and lenders underwriting applications. When we released our Q2 lending survey results, we said that the combination of strong applications and increasing completions – as well as the falling value of loans in default and number of repossessions – reflected the quality of lending and provided evidence that the market is continuing to grow in a sustainable way and enhance its ever-improving reputation. Now is the time to ensure that this continues to be the case. Let’s not take our eye oﬀ the ball. Let’s carry on this sustainable recovery and continue to build the increasingly impressive reputation of the short-term lending sector. B I www.sfintroducer.com
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Real world lending 0800 470 0430
assetzcapital.co.uk/bridging Assetz SME Capital Limited is a company registered in England and Wales with company number 08007287. Assetz SME Capital Ltd is authorised and regulated by the Financial Conduct Authority in respect of its peer-to-peer lending platform only. ’Assetz Capital’ is a trading name of Assetz SME Capital Ltd. Assetz SME Capital is registered with the Office of the Information Commissioner (Reg No: Z3338899) for data protection purposes.
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