A look back at
bridging in 2021
in association with
A look back at bridging in 2021
L-R Paula Purdy - Head of Intermediary Sales North Phil Quinn - Head of National Accounts Sam Lawson – Head of Intermediary Operations Sundeep Patel – Director of Sales Tanya Elmaz - Head of Intermediary Sales South
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A look back at bridging in 2021
Welcome to the Bridging & Commercial Magazine supplement, in association with Together
Contents
4 Overview 8 B&C X Together virtual roundtable: 2021 trends and predictions for next year 11 Case Study
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A look back at bridging in 2021
At Together, we’ve been providing specialist finance for close to 50 years, using our wealth of expertise and industry knowledge to help customers reach their property ambitions. We arranged our first bridging loan in 1985, and since then, we’ve provided more than 60,000 of them worth over £7bn—so we think we’ve got it down to a fine art. Our experience, more than anything, has allowed us to consistently deliver great service and flexible finance at speed. So when your clients need to solve a cashflow problem, or take advantage of an unmissable opportunity, you can count on our capable team to make informed, commonsense decisions in the timescales they need—however complex their situation. Since we provided our first bridging loan all those years ago, the world has certainly changed, perhaps more so than ever over the last 18 months. But what’s clear is that investors, businesses, landlords and developers are still looking to bridging finance to support their property goals; the need to get back on track has driven huge demand in short-term lending over the last year as the nation races to get back to normality. Recent statistics from Mintel suggest the bridging market has indeed bounced back, and is estimated at £7.7bn in 2021*. And at Together, we’re on track to exceed our short-term funding volumes in 2021, compared to 2019. Safety net, or casting their net? Following the pandemic, business owners have sought bridging finance to solve cashflow issues. For example, to bridge the gap between needing to buy new stock, and waiting for a customer to make a large payment (who may well be struggling with their own post-pandemic finances). COVID has also impacted the building industry. With high demand for trades and material shortages causing serious delays, developers may choose to exit their development finance 5
“THE CHANGES WE’VE MADE OVER THE LAST YEAR WILL HELP US MEET BRITAIN’S AMBITIONS IN A WAY THAT IS SIMPLER, FASTER, AND MORE ACCESSIBLE”
A look back at bridging in 2021
arrangement onto a lower cost bridging loan – giving them more time to complete their project. Others have looked to bridging finance to use not as a safety net, but to let them to cast their nets wider, and take advantage of new-found opportunities following the pandemic. Thanks to a surge in demand and properties very rarely spending long on the market these days, bridging loans can effectively turn customers into ‘cash buyers’, allowing them to move fast so they don’t miss out on any great deals. We’ve seen more customers investing in holiday lets, thanks to the nation’s current staycation boom. And a noticeable increase in investors looking to ‘flip’ over the past year, seeking a bridging loan to ensure they can snap up a property and quickly refurbish it, before selling it on. Invariably, property investors opt for specialist lenders like us to make this process as slick as possible. The Government’s stamp duty freeze also undoubtedly played a key part in the bridging market’s recovery, due to those looking to complete in time to make the saving (for the original deadline in March 2021, and its extended phase out over the summer). Our headlines from the last 12 months To support a wider range of customer needs, we’ve made some important changes to our business, including cutting our bridging rates and increasing our maximum loan sizes and LTVs**. At every step, we’re also very conscious that we have two customers: borrowers, and our broker partners. Both have service expectations that it’s vital we meet, and we’ve made a number of enhancements to our processes over the last twelve months to create better outcomes for both.
For example, we’ve changed some of the fields on our My Broker Venue portal, making it more user-friendly. We’ve widened our use of automated valuation models (AVMs), and now around half of our residential property transactions are completed with a Hometrack valuation in minutes—digitally. And towards the end of 2020, we launched E-file, a new piece of secure electronic filing software to hold and automatically sort every document involved within the underwriting process. It recognises a passport as proof of ID, a payslip as proof of income, and so on – allowing us to be faster, smarter, and near-paperless too. The outlook for 2022 The latest predictions from Mintel reveal the UK bridging market will continue to grow over the next five years, with annual growth forecast to be between 10-12%*. And as Britain recovers from the pandemic, we’re anticipating ever more complex scenarios and borrower needs over this period, requiring the expert hand of specialist lenders’ underwriters. In addition to a continuation of the trends we’ve already seen this year, we may also see more bridging loans used to fund the purchase of larger properties for converting into HMOs, or old commercial buildings, such as disused offices or shops, developed into modern homes – thanks to a relaxation in Permitted Development Regulations. The changes we’ve made over the last year will help us meet Britain’s ambitions in a way that is simpler, faster, and more accessible – helping our intermediaries provide the best possible outcomes for their clients. For professional intermediary use only. *Source: Mintel Bridging Report September 2021 **Subject to affordability criteria being met.
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A look back at bridging in 2021
THE TOP BRIDGING TRENDS OVER THE PAST YEAR—AND WHAT’S IN STORE FOR 2022
For the final virtual roundtable of 2021, Bridging & Commercial partnered with Together to take a look back at what defined the last year and what may lie ahead for the sector in the coming months
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A look back at bridging in 2021 The live event, held on 18th November, saw Together’s intermediary sales manager for the South, Tanya Elmaz, and specialist key account manager, Lorenzo Satchell, joined by packagers Racheal Harkins, head of bridging and commercial loans at Time Finance, and Alison HoughtonCorfield, national relationship manager at Master Private Finance. The session was moderated by Caron Schreuder, Medianett’s managing director.
Building on the topic of landlords evolving their types of investment in search of further yields, Lorenzo is seeing ongoing interest in HMOs, particularly in and around university towns.
When the panel was asked to identify the top trends over the past 12 months, Racheal highlighted something which had a huge impact: the stamp duty tax holiday. “Banks were stuck and people saw bridging as an alternative.”
Alison remarked that demand from young professionals wanting to live in a more social set-up, such as an HMO, for a decent price and with good amenities, is growing. This, coupled with what remains a difficult first-time buyer market, means that this asset class looks set for success in 2022.
“It propped up the property market and massively took us through 2021,” agreed Tanya, adding that it showed the importance of the sector and the government’s willingness to ensure its survival. The somewhat shocking levels of business that arose because of this initiative meant that delays were felt across the board, specifically when it came to legals. “It caused a backlog everywhere; the solicitors we were working with put in extra hours . . . I sympathised with them; they had the same pressures we did,” Racheal stated. Holiday lets was also a trend over the past year, which Tanya said arose from landlords and investors wanting to obtain higher yields from their portfolios, and was further supported by travel restrictions. “We’ve managed to fall back in love with the UK.” Racheal pointed to the skyrocketing pricing of Airbnb’s and guesthouses as proof that people are starting to see the value and income potential of these investments.
“[There has been] a resurgence of the rental market,” he commented. “Landlords are either looking to extend, purchase in new markets such as holiday lets or HMOs . . . or refurb to generate more income.”
The demise of the high street has revealed semi-commercial opportunities, too, which provide the surety of residential against the commercial risk involved. Similarly, disused office space is being acquired by developers looking to convert it into residential by taking advantage of the relaxed permitted development rules. Elsewhere, the well documented desire for more space led to many seeking properties outside of city centres. Alison reported a notable surge in regulated bridging to fund opportunities where prospective buyers battled it out to be the first to secure their next home. “If you were relying on a mortgage, often you’d get taken out of the equation,” she explained. This was the year of the property auction, too, for which bridging is perfectly suited. As auction houses moved online, people who would not typically explore acquiring property this way were suddenly becoming involved and in need of funding.
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A look back at bridging in 2021 It has undoubtedly been a defining period for relationships in the sector. Lorenzo emphasised that competition—in terms of rate and innovation—has never been stronger.
tech advancements were hitherto often a slow burning project, this has all changed. “Customers expect more, and brokers and distributors do, too—lenders have to deliver.”
He feels that the need for education to flow from lender to broker and from broker to introducer is necessary to provide a “360-degree package” to ensure best client outcomes.
In response to a question about the concept of automation in what is still a specialist, bespoke product area, Lorenzo said: “Process and lending decisions [are distinct] and should remain separate— it’s the process that should continue to improve [through technology].”
Racheal confirmed that Time Finance took the opportunity during restricted business periods to review its lender panel and operations with a view to improve the customer journey—underpinned by robust compliance measures at every turn. A training programme for new starters was devised and lenders began to come in to provide on-the-job experience. “People learn better by doing.” “This year has been super special for the relationships we have nurtured with our partners,” Tanya commented. “We’ve all gone through something together.” Having open dialogue and feedback mechanisms is a priority for the lender. For example, during 2021, broker engagement has led to more streamlined processes, wider AVM criteria and expanding online verification for income. “Lenders have really taken feedback on board, and we have seen a lot of it come into action,” Racheal shares. “With some lenders, prior to the pandemic, it would fall on deaf ears.” In terms of expectations for 2022, Alison would like for more industry players to embrace technology. “We need to set our stall out for the new generation,” she urged. Tanya agreed that businesses in our sector need to think “bigger”. While
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He predicts that property development will continue to be busy in over the next year. Following the difficulties presented by materials shortages and cost hikes, leading to many holding off or landbanking, plenty of developers will resume projects in the coming months, possibly spurred on by the commercialto-residential conversion trend. Fresh off the back of COP26, Racheal believes that we will see more attention on building greener. “We’re going to see a lot of businesses wanting to transition into being green and maybe raise funds on a commercial property in order to do that. That’s probably going to be our biggest trend.” The panel went on to discuss the lack of general support from the high street for non-standard properties and that specialist lending—and its hallmark flexibility— will once again come into its own. Tanya expects that businesses will continue to require finance in the form of cashflow injections as they continue to recover from pandemic-related losses. Picking up this thread, Racheal suggested that a product like a homeowner business loan might become popular as a cheaper alternative for those repaying CBILS liabilities.
A look back at bridging in 2021
CASE STUDY
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£2.9m for a property developer to buy a London care home Together provided a bridging loan of nearly £2.9million for a borrower to purchase a vacant care home in London in ten working days. The experienced developer was able to snap up the disused 22-bedroom care home, set in four acres of green belt land, which had previously closed. It had been put on the market and earmarked as a housing site in the local council’s plans. However the developer, who owns an extensive property portfolio, recognised there was a continuing need for specialist care in the area and lined-up a care home operator, who agreed to lease it once it is refurbished and extended. Together received the application from broker Enness Global, which provides finance for High Net Worth (HNW) individuals, and instructed a valuation of the large property. The unregulated bridging loan was funded in ten working days after receiving the valuation, allowing the purchase of the site for £4.5million. Lorenzo Satchell, Together’s Regional Account Manager for London, who structured the deal, said: “This was a complex case and we were up against a tight deadline to provide the finance, but we showed the common sense and flexibility for which we’ve become renowned to make sure we could deliver on time. “Our expert underwriters and in-house team at Priority Law looked closely into the borrower’s application, keeping all parties up-to-date with every aspect of the deal as it progressed, and, working closely in partnership with Enness, we pulled out all the stops to meet the seller’s deadline.” Chris Whitney, Head of Specialist Lending at Enness Global, said: “The speed at which Together provided the finance our client needed was impressive by anyone’s standards. We faced some challenges along the way and the patience and perseverance of Together’s team was essential as they worked with us to resolve issues effectively. “Our client was delighted with the outcome and has now put forward a proposal to the local authority planners to build new homes on part of the site, to meet urgent local housing needs. Hopefully, this will be agreed – giving the local community the best of both worlds.”
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Go on. Make their day. Our competitive range of regulated and unregulated Bridging loans have become renowned for their speed, ease and flexibility. With thousands of them under our belts over the years, there’s practically nothing we haven’t seen before. So whether your client’s been left in the lurch by another lender or just needs to move quickly on their next investment, we'll work with you and apply our common sense approach to make it happen.
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togethermoney.com/maketheirday For professional intermediary use only.
