BRIDGING Champion of the Bridging Professional
INTRODUCER www.sfintroducer.com
ASTL Bridging in-depth Interviews
July 2022
Doing it differently
Anastasia Ttofis on being a forward-thinking entrepreneur in the specialist lending space
EDITORIAL
COMMENT
Managing Editor Paul Lucas paul.lucas@keymedia.com Deputy News Editor Jake Carter jake.carter@keymedia.com News Editor Richard Torne richard.torne@keymedia.com Commercial Director Matt Bond matt.bond@keymedia.com Advertising Sales Executive Jordan Ashford jordan.ashford@keymedia.com Campaign Manager Amie Suttie amie.suttie@keymedia.com Campaign Coordinator Raniella Alonzo raniella.alonzo@keymedia.com Content Editor Kel Pero Production Manager Monica Lalisan Production Coordinator Loiza Razon Designer Khaye Cortez Head of Marketing Robyn Ashman robyn.ashman@keymedia.com
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A bridge over rocky waters
Contents 4 Donna Wells Buckle up for what’s ahead
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hen headlines are filled with alarming things like “UK housing crash” and “Housing bubble about to burst,” it would be easy to think the UK housing market was in dire straits – and with it, the business of the humble mortgage broker. But reality and perception, it seems, are two distinctly different things. House prices actually hit another high for the fifth consecutive month in May – and yes, there was a noticeable slowdown in the pace of price growth, but the average price of property coming to the market still rose to £368,614, according to the latest Rightmove House Price Index. Yes, it seems prices are starting to stabilise, but brokers remain in a comfortable place – particularly if they make bridging a permanent part of their portfolio. Despite strong economic headwinds in the shape of high inflation, Chris Timms, head of sales for the Midlands and North at Octopus Real Estate property, calmly explained to Bridging Introducer that there were still plenty of investment opportunities to be had in the bridging and buyto-let fields. “Property prices are continuing to boom, and I think there is still going to be a very healthy market. Personally, I think that’s not looking to change anytime soon,” he said. His confidence was backed by recent figures from the Association of Short Term Lending (ASTL) that showed that bridging numbers remained strong in Q1 2022 compared to their long-term average – completions reaching £1.04 billion, compared to £900 million in the same quarter a year earlier. The key to maintaining this momentum is responsible and customer-focused lending. For brokers, it’s about finding a lender they can trust to deliver in the timescales outlined “because so many transactions are now time-sensitive,” as Timms explained. With high standards of underwriting, there is no reason why the bridging market can’t continue to look down with confidence on the rocky waters below.
6 Sonny Gosai Bridging for business 7 Vic Jannels Delivering consistent growth 8 Market updates A look at lender launches and bridging numbers 12 Anastasia Ttofis Breaking the mould 14 Chris Timms The importance of timeliness 16 Nicola Firth Top five criterion searches for brokers 18 ASTL The latest from the bridging market
Paul Lucas
www.sfintroducer.com
JULY 2022 BRIDGING INTRODUCER
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What’s ahead? Donna Wells director, F4B
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am certainly no doom-monger or naysayer, but it’s prudent to be realistic about the market conditions in which we are currently operating and the impact from a number of economic outliers on a wide variety of borrowing needs. I won’t dwell on the negatives for too long, although I’m sure that we’ve all seen that dreaded word ‘recession’ being bandied about a little bit more frequently in recent weeks in light of rising inflation levels, escalating living costs, and a falling GDP. FALLING GDP
On this subject, according to the latest statistics from the ONS, the UK GDP fell by 0.3 per cent in April 2022, after a decline of 0.1 per cent in March 2022. Breaking this down, services fell by 0.3 per cent in April 2022, and these were the main contributors to April’s fall in GDP, reflecting a large decrease (5.6 per cent) in human health and social work, where there was a significant reduction in NHS test-andtrace activity. Production fell by 0.6 per cent in April 2022, driven by a fall in manufacturing of 1.0 per cent on
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the month, as businesses continue to report the impact of price increases and supply-chain shortages. Construction also fell by 0.4 per cent in April 2022, following strong growth in March 2022 when there was significant repair and maintenance activity following the storms experienced in the latter half of February 2022. This represents the first time that all main sectors have contributed negatively to a monthly GDP estimate since January 2021. So what does this mean for the mortgage market? CREDITWORTHINESS
This will have many potential implications for affordability and lending appetites in certain quarters. For many borrowers, this is where the specialist mortgage market will really rise to the fore, especially from a creditworthiness perspective. This was outlined in a recent Knowledge Bank criteria tracker which showed a “potentially worrying development” in borrowers’ creditworthiness as the search for lenders accepting applicants with ‘missed or late payments’ entered the top five criteria searches in May. Looking from a selected sector viewpoint, the buy-to-let marketplace continued to be a hive of broker activity, and for the third month in a row, ‘firsttime landlords’ looking for a lender was the top search. This was followed closely in second place by brokers searching for buy-to-let lenders who will consider lending to limited companies. The top five searches in the commercial sector had a new entrant in May as brokers searched for lenders who would consider ‘mixed use properties that are part commercial,’ which broke back into the top five searches for the first time since January. When it came to bridging, the most common search for clients with bridging needs remained consistent, with ‘regulated bridging’ taking the top spot, followed closely by ‘minimum loan amount’ and ‘maximum LTV.’ Like the commercial
sector, activity in the bridging sector remained robust throughout May, with the number of broker searches increasing month on month. REGULATED BRIDGING
We continue to see some sustained demand for regulated bridging, although it’s fair to say that the overall amount of bridging business has seen a slight lull. This was highlighted in data from the Association of Short Term Lenders (ASTL), which showed that bridging applications dropped by over 50 per cent to £6.34bn in Q1 2022. The figures also outlined a 15.8 per cent quarter-on-quarter fall in bridging completions to £1.04bn; however, they still remain higher than in Q1 2021, when completions were just over £900m. Despite the drop, bridging loan completions have now been at more than £1bn for four consecutive quarters for the first time since records began. The size of loan books has also decreased, standing at £4.48bn at the end of March, down from £5.08bn at the end of December 2021. On a more positive note, the average LTV on a bridging loan is now 58.7 per cent, a slight drop on the 61.2 per cent reported in the previous quarter, and the value of loans in default has now fallen for five consecutive quarters, declining by 12.5 per cent compared to December 2021. There are certainly some positives to be seen here, especially when you look beyond the widely expected fall in the number of applications and completions. The fact that average LTVs and loans in default both fell demonstrates an improved culture of responsible and borrower-centric lending. Awareness from the adviser community also continues to rise as a greater number are identifying where and when bridging finance can be viable and beneficial for their clients. In addition, the value of a trusted packaging partner is growing, and this combination is helping to increase professionalism in a sector which – let’s face it – has not always had the most glowing of reputations. www.sfintroducer.com
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More bridging lenders needed to provide calculators for brokers Sonny Gosai senior sales development manager, Norton Broker Services
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he short-term nature of bridging loans means that efficient service and speedy delivery are paramount. Getting back quickly to clients who have applied for a bridging loan is crucial in order to get them the finance they need as well as to ensure that the broker and lender involved secure the client’s business. Yet there remains a distinct lack of broker access to bridging calculators on lender websites, which, in some cases, is delaying the speed at which applications are processed. This is particularly true of vanilla cases, in which clients need a bridging loan for standard costs such as renovating a property to refinance or sell it on or light refurbishment work such as installing a new bathroom or kitchen. In simple cases like these, a bridging calculator that enables brokers to get an indication of the cost of the loan, including the gross loan amount needed to be paid at the end of the term as well
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as the rates and fees attached to the loan, is highly beneficial. It immediately gives brokers all the information they need to go back to their clients with a fully informed quote. “Our online calculator, complemented by the Shawbrook portal, allows our brokers to submit a full application online and then receive credit-backed terms,” says Gavin Seaholme, head of bridging and second-charge mortgages at Shawbrook Bank. “As the bridging market evolves, so too does the need for technology to support it.” Bridging calculators also allow brokers to get on with securing the deal rather than having to call their BDM for information and wait for an indicative quote before getting back to clients a few days later. There are benefits for lenders, too, as this allows BDMs to focus on more complex cases such as split titles, major refurbishment, and planned development cases that need some more bespoke pricing terms rather than a quick predicted quote using a simple calculator. Sundeep Patel, director of sales at specialist lender Together, says, “We provide a quick-quote calculator for bridging loans that allows packagers
to provide as many iterations of terms or mortgage illustrations that they like, which can drastically reduce the time taken to provide their client with an offer – helping us and our brokers secure more business.” Currently, only a handful of lenders provide access to bridging calculators on their broker websites, but for standard vanilla cases, this should be the rule rather than the exception. In particular, smaller lenders that do not deal with as many non-vanilla cases would help brokers immensely by allowing them access to bridging calculators and pricing structures. This would help to streamline the bridging loan application process for standard applications and help to drive up business volumes for brokers and lenders alike. It would also ensure that brokers are placing business with the right lender and not wasting time with those who cannot take on the business. Another benefit of online calculators would be eliminating the need for constant chasing from brokers waiting to hear back from lenders on non-complex cases. Sometimes this can take up to 48 hours or more, and, from a business perspective, can lower service standards – and in the worst-case scenario, result in the loss of a client. “Speed is still king in bridging, so giving a broker the ability to get almost instant decisions is a great selling point for them with their customers,” says Paul Delmonte, key account manager at UTB. By providing greater access to bridging loan pricing calculators for standard applications, lenders can help brokers speed up the loan process for vanilla cases and therefore secure more business. This will leave more time for BDMs to work on the more complex cases that require bespoke pricing, and help to drive growth in bridging loan volumes. www.sfintroducer.com
REVIEW
ASTL
Caution, calm, customer focus deliver growth Vic Jannels CEO, ASTL
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he latest lending data from the ASTL shows that in the first quarter of this year, bridging applications and completions fell back from their record highs in Q4 2021. They do, however, remain strong when set against the long-term average, and data on default rates and average LTVs is also encouraging in terms of the quality of the loans that are being written. The figures, compiled by auditors from data provided by members of the ASTL, show that bridging completions reached £1.04bn in the quarter ending March 2022, a fall of 15.8 per cent on the previous quarter, when they reached £1.24bn. However, they remain higher than the same quarter last year, when completions were just over £900m, and completions have now been at more than £1bn for four consecutive quarters for the first time since records began. Bridging applications fell more significantly in Q1 2022, to £6.34bn, representing a drop of just over 50 per cent on the previous quarter. And the size of loan books has also fallen, standing at £4.48bn at the end of this March, down from £5.08bn at the end of last December. At the same time, the value of loans in default has now fallen for five consecutive quarters, decreasing by 12.5 per cent compared to December 2021, and average LTVs have also fallen. The average LTV on a bridging loan is now 58.7 per cent, compared to 61.2 per cent in the December 2021 quarter. These last two statistics are www.sfintroducer.com
encouraging as, in the current economic environment, all lenders should be taking a measured approach to growth. There is definitely room for our market to grow, and I have no doubt that there are situations in which bridging could prove the most suitable solution for clients but is still not always being considered by brokers.
“The UK economy contracted by 0.3 per cent in April, following its fall of 0.1 per cent in March, and the warning signs are that circumstances are only going to get tougher” However, we must take a cautious approach to this growth. Official figures show that the UK economy contracted by 0.3 per cent in April, following its fall of 0.1 per cent in March, and the warning signs are that circumstances are only going to get tougher as the year progresses. The situation in eastern Europe has exacerbated already problematic supply-chain issues, stymied trade and investment flows in many areas, and created overall uncertainty beyond our shores. At the same time, inflation has hit a 40-year high, and we all know that food and energy prices are going to continue to soar. All of this will take its toll on affordability, credit ratings, deposit savings, and many other elements of buying property. We are likely to see an increase in chain breaks, and an increasing number of borrowers turning to the specialist market. On the development side, projects will be facing supply-chain concerns, labour shortages, and any number of other unexpected delays.
In this type of environment, sensible, sustainable lending can prove invaluable to customers, and so it is important that we continue to make bridging finance available for short-term cashflow requirements. At the same time, now is not the time to be chasing volume by taking on unnecessary risk. There are economic indicators that are more positive and give reason to be optimistic about the longer-term outlook. Employment is high, and the number of job vacancies has exceeded unemployment for the first time since records began. The property market also remains buoyant, with activity remaining strong. For brokers, now is the time to work with lenders whom you know you can trust to take a robust and fair approach. In order to ensure that your clients are treated well and provided with the best possible outcomes, we would encourage you to work with lenders that remain committed to transparency, customer focus, and diligence. In short, we would encourage you to work with lenders that are members of the ASTL. Our code of conduct, to which every member must commit, ensures that firms act with honesty and integrity, disclose all costs up front, and avoid excessive fees and unclear terms – and that’s just for a start. Our members set a high benchmark for quality service, customer focus, and responsible lending. A full breakdown of our code of conduct, as well as our rules for members, can be found on the ASTL website. There is no perfect formula for lending, not least with the kind of challenges currently on the horizon. However, by working with an ASTL member, brokers can be sure that every step is being taken to ensure a positive experience and outcome for all. JULY 2022 BRIDGING INTRODUCER
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Bridging numbers fall in Q1 2022
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ata from the Association of Short Term Lenders (ASTL) shows that bridging applications and completions in the first quarter of 2022 fell back from the highs recorded in the last quarter of 2021, but remained strong compared to the long-term average. The figures, compiled by auditors from data provided by members of the ASTL, show that bridging completions totalled £1.04 billion in the quarter ending March 2022, a fall of 15.8 per cent on the previous quarter, when they reached £1.24 billion. ASTL, however, said they remain higher than in the same quarter last year, when completions were just over £900 million, and completions have now been at more than £1 billion for four consecutive quarters for the first time since records began. Bridging applications dropped off more significantly to £6.34 billion in Q1 2022, representing a drop of just over
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50 per cent on the previous quarter. The size of loan books also fell, standing at £4.48 billion at the end of March, down from £5.08 billion at the end of December. The value of loans in default fell for the fifth consecutive quarter, decreasing by 12.5 per cent compared to December 2021, and average LTVs have also fallen. The average LTV on a bridging loan was 58.7 per cent, compared to 61.2 per cent in the December 2021 quarter. Vic Jannels, ASTL chief executive, said that while the latest data showed a reduction across most areas in the first quarter of 2022, the numbers were set against record results at the end of last year, and the volume of lending continues to be strong. “Given the current context of global uncertainty and increased living costs, it’s perhaps reassuring that record growth has been curtailed and the market is continuing to grow at a steadier pace,” he said.
“[W]hile the latest data showed a reduction across most areas in the first quarter of 2022, the numbers were set against record results at the end of last year, and the volume of lending continues to be strong” Jannels added, “This points to high standards of lead qualification and underwriting across our members, who are continuing to provide the bridging finance that customers need, in a way that is robust and sustainable. Average LTVs have fallen, and the fact that the value of loans in default has now fallen for five consecutive quarters shows that lending continues to be responsible and customer-focused.” B I
www.sfintroducer.com
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AUGUST 2020 BRIDGING INTRODUCER
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Spring Finance brings specialist bridging proposition to whole of market Spring Finance has launched its specialist bridging proposition on the wider market after a successful three-month pilot.
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pring Finance has launched its specialist bridging proposition on the wider market after a successful three-month pilot. The specialist lender said it will be offering a comprehensive range of loans to support intermediaries and customers with the aim of building a trusted and respected funder that makes quick, robust decisions and provides a flexible, supportive, and efficient service. The product range includes FCA regulated, unregulated, first and second charge, complex credit, heavy refurbishment (with drawdowns), and light development loans. Loan sizes are from £50,000 to £2m. Spring comes to the market with over 60 years of combined experience. It also recently announced the appointment of Gavin Diamond, joining the lender as chief executive in July 2022. Spring has been running a pilot scheme with a select group of intermediaries since March 29, taking feedback on the products, processes, and service. “Feedback from our pilot reaffirms that intermediaries want a trusted partner to support their business, and I am delighted we are now bringing our offering to the wider market,” said Jim Baker, sales director of bridging at Spring Finance. “I’m delighted with the feedback from our pilot and am excited that we are now launching to the wider market,” said Claire Newman, head of
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Spring Finance senior bridging team bridging at Spring Finance. Meanwhile, Spring also announced a refresh of both its website and logo, with the new branding aimed at reinforcing the lender’s evolution while still retaining its heritage. “Spring Finance has seen a clear gap in the bridging market for a lender that has the experience and expertise to make transparent and robust lending decisions. This, combined with Spring’s common-sense underwriting and efficient processing, even on complex
cases, means financial intermediaries and their customers can rely on us to deliver the service we have promised,” Baker said. “One of the core elements of our proposition at Spring is the personal approach to each loan and the commitment to provide a high level of service. The whole team takes real pride in a job well done, and this will continue through this launch and as we look to enhance our product range over the coming months,” Newman added. www.sfintroducer.com
INTERVIEW
INDEPENDENT ADVICE
“We’ve challenged lenders on their perception of what should be done” Co-founder of specialist firm on how to break the mould
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nastasia Ttofis is not your run-of-the-mill solicitor – and she’s more than happy to remind you of the fact. “When I meet people, they’ll say to me, ‘You’re nothing like a lawyer.’ I always think, What does that mean? I meditate and I dress a little bit quirky. It took me until now to embrace that and actually realise that was who I was. I thought I was a lawyer, which meant I wore suits. Now I just always go around in my campervan at the beach with my dog and I dress how I want to dress, and I speak how I want to speak.” None of that has evidently prevented Ttofis from flexing her entrepreneurial skills and succeeding in the business world, because she’s the managing director and co-founder of law firm iLA. iLA is an acronym for ‘independent legal advice, which, coincidentally, is also what it does – providing advice in the specialist lending sector, whether it’s to do with bridging and buy-to-let or any other legal matter related to banking and property. According to the company’s blurb, the Bournemouth-based firm is the only SRA-regulated law outfit in the UK that is solely dedicated to giving independent legal advice. In the buy-to-let segment – the firm’s bread and butter – about 60 per cent of iLA’s business is with property developers; the remaining 40 per cent is with JBSPs
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(Joint Borrower Sole Proprietors). But by offering a same-day service and incorporating high-tech in a bid to increase speed and efficiency, iLA has set the cat among the pigeons in a sector normally thought of as slow, lumbering, and strictly procedural. To the collective gasp of many in the legal profession, instead of having face-to-face encounters, clients hold e-meetings and need only provide a laptop, phone, or tablet.
“Finding lawyers who actually do bridging is hard. You get a lot of lawyers who do property – residential and conveyancing work – but bridging is just in a different market, so that’s kind of the starting point of what we do” If that seems far too unconventional for some, Ttofis said she and her cofounders recognized early on that there was a gap in the complex bridging and BTL market for such a speedy service. “Finding lawyers who actually do bridging is hard. You get a lot of lawyers who do property – residential and conveyancing work – but bridging is just in a different market, so that’s kind of the starting point of what we do.
“Luke, my business partner, and I do this day in, day out, and have done so for many years. In terms of why lawyers don’t do it, it’s that professional indemnity insurance is prohibitively expensive.” Speeding up the process was the next piece of the puzzle. “In terms of the technology we use, everything we’ve done is purpose-built to be fast,” she said. The firm uses HelloSign, a DocuSigntype software for deciding terms of business, and a digital identity verification tool from Amiqus, a fintech firm that last year entered the public sector both with the NHS and the Scottish government. It’s now the firm’s system for onboarding. It also means that iLA can charge a flat fee rather than recorded time, which is what old-school law firms normally do. “There’s less time spent faffing around. Times are changing,” she added. “We’ve challenged a number of lenders on their perception of what should actually be done, and they’ve changed their minds, which for us is a huge achievement. “I find it odd when people insist on paper-certified ID because there is no logical reason for it. It’s only because it’s always been done that way and people struggle to understand that this other way is so much better and so much more secure.” iLA’s approach ruffled a few feathers at the beginning, but in her view it’s www.sfintroducer.com
INTERVIEW
INDEPENDENT ADVICE
only a matter of time before everyone accepts the new order – and the pandemic has merely helped things to move along a lot faster. “Prior to COVID, you could only do it in person, but during COVID it went online, and it stayed online. And 99.9 per cent of lenders will allow the advice online.” By contrast, lawyers will not use online ID verification, and will generally struggle with the concept – but they’re missing the point, she stressed. “What lawyers think clients want is literally the complete opposite of what clients want,” she said. “They don’t care about the fancy office or the fact that you speak the Queen’s English. They want you to be a normal person.”
“What lawyers think clients want is literally the complete opposite of what clients want,” Ttofis said. “They don’t care about the fancy office or the fact that you speak the Queen’s English. They want you to be a normal person”
Anastasia Ttofis
www.sfintroducer.com
For Ttofis, normal could also mean breaking with convention, which is perhaps easier for someone whose background was markedly different from that of her peers. Brought up in modest surroundings – her grandparents came to the UK after escaping the Turkish-Cypriot war in 1974 – she was the first person in her family to go to university. But not having a template to work with can sometimes help in business, and in Ttofis’ case it became a guiding philosophy. “If you try and be someone else, it’s not going to work,” she said. “I’ve created my own path. You come up with the best creative ideas when you are you. Rather than dwell on the prejudicial issues that might exist, I just say, ‘Look at where we can get to, look at this awesome stuff that happens.’ I think that’s the mantra I’ve lived by.” JULY 2022 BRIDGING INTRODUCER
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“In bridging, speed is of the essence” Head of sales at specialist investor and lender bullish about market, despite headwinds
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hris Timms, head of sales for the Midlands and North at Octopus Real Estate – property, is in a comfortable place. Despite strong economic headwinds in the shape of high inflation, which most recently edged past nine per cent, and an increasing higher-rate environment that’s making lending inherently more expensive, Timms calmly explained that there were still plenty of investment opportunities to be had in the bridging and buy-to-let fields. “Property prices are continuing to boom, and I think there is still going to be a very healthy market. Personally, I think that’s not looking to change anytime soon,” he said. “There is still significant wealth, and people who have access to money now are thinking about the best way to invest their cash, whether it’s in a long-term ISA or in other investment products.” The housing market has indeed proved to be resilient – up to now. According to the latest figures issued by HM Land Registry (HMLR), average house prices across the UK increased by 12.4 per cent year-on-year to April 2022, despite five consecutive interest rate increases by the Bank of England and the cost-of-living crisis. However, this came with an important caveat, as the figures were for April, before economic conditions began to deteriorate significantly.
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“According to the latest figures issued by HM Land Registry (HMLR), average house prices across the UK increased by 12.4 per cent year-on-year to April 2022, despite five consecutive interest rate increases by the Bank of England and the cost-of-living crisis” Chris Timms Timms acknowledged that fact without downplaying the state of the market. “We’re obviously cautious … we want to make sure that we’re not taking significant risk on any potential falling property price. However, anyone looking to buy will tell you that it is still a very hot seller’s market at the moment, and properties that are listed are often selling before they even go on Rightmove.” Rate-savvy investors were nonetheless trying to stay one step ahead of the volatile market, he went on to add. “People are looking to really capitalize and make quick wins by getting [up to] three projects under their belts. We’re very fortunate because we’re well-priced, so we attract the best quality of borrower. It means that we’re able to be prudent and not take unnecessary risks with our
capital, so the people we lend to are financially very secure and stable, and also generally experienced, and will have a good idea of the transaction they’re getting into.” As a specialist real estate investor and lender, Octopus Real Estate – part of the Octopus Group – offers most types of property finance, having lent more than £5.5 billion in more than 4,000 loans so far, with loans typically ranging from £100,000 to £1m. “We’ve got very deep pockets. We’re very fortunate in that sense,” Timms said. Most of that money is lent from its own investment funds, and its “bread and butter” product, as Timms described it, is bridging. “It’s what we’ve been known for for years – that’s www.sfintroducer.com
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our main transaction,” he added. Much of that segment is centered around HMO conversions, a “really strong market” in which traditional four-bed terraced or semidetached houses are split into a dozen or more rooms to add value, often achieving up to 12 per cent yield per annum for the investor. The firm also deals in commercial property other than C-3 (that is, not more than six residents living together as a single household), as well as ground-up residential, including multiple units and flats. Describing the quality of his team of www.sfintroducer.com
underwriters as “second to none,” Timms said Octopus thrived in dealing with more complex residential cases, such as trust funds, pension funds – and those deals that high-street banks normally eschew. “We are not scared of things that are outside of what you might expect a normal bank or building society to lend on. So, in terms of the borrower profile, we’ll lend to foreign nationals, to expats, and to complex ownership structures. We understand much more complicated, complex structures than one might expect from a bank or building society lender,” he said.
Asked what challenges brokers were facing in particular from his and his company’s perspective, he said, “I’d say it’s finding a bridging lender they can trust to actually deliver within the timescales because so many transactions now are time-sensitive. Speed is really of the essence. If you can’t complete that deal, it’s completely pointless, and the brokers know that.” In response, Octopus has changed its underwriting credit structure and enhanced its legal proposition by adding a team of dedicated bridging underwriters who look exclusively at bridging deals. JULY 2022 BRIDGING INTRODUCER
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INTERVIEW
CREDIT WORTHINESS
What are brokers’ top five criterion searches? Knowledge Bank lists what brokers are searching for in latest criteria tracker results
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ew research from criteria search specialist Knowledge Bank shows a potentially worrying development in borrowers’ creditworthiness as brokers’ searches for lenders accepting applicants with ‘missed or late payments’ entered the top five criterion searches in May. Knowledge Bank’s criteria tracker reveals brokers’ most common criterion searches to find lenders who will consider their clients. The search for ‘missed or late payments’ follows recent trends in increasing interest rates and the much-publicised cost-of-living crisis with fuel, food, and energy bills rising exponentially for households. Knowledge Bank chief executive Nicola Firth said that although arrears are trending downwards, this could serve as a warning of impending criteria tightening. “With interest rates rising and household bills taking up an increasing share of household income, affordability looks set to be affected, and lenders will be forced to adapt criteria accordingly. Lenders are very
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BRIDGING INTRODUCER JULY 2022
“With interest rates rising and household bills taking up an increasing share of household income, affordability looks set to be affected, and lenders will be forced to adapt criteria accordingly. Lenders are very aware that household incomes are being adversely affected by cost-of-living rises” aware that household incomes are being adversely affected by cost-ofliving rises, and so are likely to tweak their criteria to ensure a high level of responsible lending,” Firth said. As with the three months preceding last month, brokers’ favourite residential loan search in May was ‘maximum age at end of term’ as borrowers look to extend the lives of their mortgage terms. Also in the residential loan category, the search for ‘self-employed with one year’s accounts’ jumps up to second place after entering the top five only last month. Knowledge Bank noted that the buyto-let sector continues to be a hive of broker activity, and for the third month in a row, the top search there is for potential ‘first-time landlords’ looking for a lender. This is followed closely in second place by brokers searching for buy-tolet lenders who will consider lending to limited companies. The most common search for clients with bridging needs remained
Nicola Firth consistent in May with ‘regulated bridging’ taking the top spot, followed closely by ‘minimum loan amount’ and ‘maximum LTV.’ Like the commercial sector, activity in the bridging sector remained robust throughout May, with the number of broker searches increasing month-onmonth. The top five searches in the commercial sector had a new entrant in May as brokers searched for lenders who would consider ‘mixed use properties that are part commercial.’ This breaks back into the top five searches for the first time since January. “With interest rates and mortgage rates set to rise throughout the year, there is an increasing pressure on brokers to secure a product for their clients while rates are still affordable. As the rush for the last remaining low rates heats up, brokers can avoid wasted time in the application process simply by checking criteria conditions prior to a product search,” Firth said. www.sfintroducer.com
INTERVIEW
ASTL
What’s happening in the bridging market? There is little sign of a slowdown – but there are challenges
T
he bridging market is continuing the momentum it built coming out of the pandemic, according to Vic Jannels, chief executive at the Association of Short Term Lenders (ASTL). Jannels explained that there seems to be little sign of a slowdown in the number of new enquiries reaching lenders and brokers. “This is great news, of course, particularly in this challenging economic environment, but there remains an ongoing challenge for the sector,” he said. While enquiry levels are sky-high, Jannels said the proportion of those enquiries that go on to complete remains relatively low. He explained that there are a number of reasons for this, such as single cases being pitched to a number of different lenders or via a number of different brokers. “Sometimes it is due to customers changing their minds. In some cases, particularly in the current environment, it is because the reason why the bridging loan was initiated is no longer valid by the time the application progresses,” Jannels added. The whole purpose of bridging finance is that it spans the gap to a longer-term solution, and Jannels said there will always be occasions when the longer-term solution, such as the sale of a property or completing on a term loan, comes about more quickly than expected. “The longer it takes for a bridging application to progress to completion and release of the funds, the more likely it is that the short-term loan will no longer be required,” he said. Consequently, he explained, the longer it takes for bridging loans to
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BRIDGING INTRODUCER JULY 2022
complete, the more likely it is that conversion rates will remain low. In a competitive market, lenders compete on service and speed of delivery, but Jannels said that, as we all know, the pace at which an application progresses is not influenced by lenders alone. It relies on brokers and customers providing any required information or documentation promptly and, importantly, on external processes, such as valuation. “We know that the time taken to secure the physical valuation of a property is becoming more drawn out and the costs of valuations are also increasing,” Jannels said.
“The average age of valuers is now more than 60, with more people retiring from the role than joining the profession. This means that the pool of resources is dwindling, [and] securing a valuer takes longer” He added that after having spoken with professionals in this area, he believes the main cause of this is demand for valuations exceeding the supply of trained valuers. The average age of valuers is now more than 60, with more people retiring from the role than joining the profession. This means that the pool of resources is dwindling, securing a valuer takes longer, and, naturally, with the economic forces of supply and demand, it is becoming more expensive. According to Jannels, this is a long-term problem, and there is no simple solution. “While we understand that it can be
Vic Jannels frustrating for lenders and for brokers that valuations are taking so long, we believe the best way to address the issue is through understanding and open communication,” he said. He went on to add that another longterm issue facing the market is that of the minimum energy-efficient standards for rental properties due to come into force in 2025. From then on, in order to let a property, the proposals are that it must achieve a minimum Energy Performance Certificate (EPC) rating of “We know that much of the UK housing stock is currently below this level, and so changes to properties will be necessary in order for them to be compliant,” Jannels said. As the deadline looms, Jannels explained that it is likely there will be a great many demands made on tradespeople to carry out remedial work and on EPC inspectors to assess properties. “So it would be prudent to address the issue sooner rather than later with prospective buyers, so that plans can be made and finance sourced if it is required,” he concluded. www.sfintroducer.com
Bridge rates from 0.55% Fast, people-led, decision making Loans from £100,000 to £5,000,000 LTV/LTC/Refurbishment costs 75%/85%/100% up to 24 months Rates from 0.55% with competitive procuration fees
Single point of contact Simply email us and one of our team will be directly in touch contact@sancus.com
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sancus.com Indicative criteria only, each loan application is considered on its merits. Sancus Lending (UK) Ltd is regulated by the FCA, firm reference number 593992. Risk Warning: If you are co-funding you could lose part or all of your capital. Indicated returns, unless otherwise stated are shown before any provision for bad debts and may be subject to tax. Sancus do not provide private mortgages. Sancus Lending (UK) Ltd is incorporated under the laws of England and Wales, company number 7534003. Part of Sancus Group Holdings company no 57766 registered office Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL.
Our fixed rates are the real deal. Worried about interest rates in the current climate? At Assetz Capital, our bridging rates have always been fixed for the duration of your client’s loan. Plus, once we have issued a DIP, we will hold the rate for 3 months, so make sure you get a deal locked-in with us. Let’s discuss your next case: 0800 470 0430. *Please note Assetz Capital does not offer regulated mortgage contracts
Laleta Buctkuar, Relationship Director: Bridging
0800 470 0430
assetzcapital.co.uk/bridging
Find out more about our bridging product.
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.
