Donna Wells

Demand for specialist lending grows

Donna Wells

director, F4B

As we head into the last part of 2022, a variety of specialist lenders are commanding a growing level of interest from intermediaries who are looking to service the shifting needs of their clients. This is a trend that will gather further momentum, particularly in the specialist residential marketplace, as more potential homeowners fall outside of the traditional mortgage selection criteria.

This was evident in a recent study from Together that suggested that specialist residential mortgage lending is set to rise from £5bn to £16bn by 2030, driven largely by long-term shifts in working and living patterns.

SPECIALIST RESIDENTIAL LENDING

The study, carried out in partnership with Dr John Glen, an economist, also predicted that the overall UK residential mortgage market will expand by 56 per cent over the next eight years and that, of this rise, as many as 500,000 mortgage applications will be dependent on specialist lenders – doubling their market share to four per cent of the overall UK mortgage market.

Whilst I am not privy to how this information was collated or calculated, it’s difficult to disagree with the sentiments behind the findings or the quote that supported them. As a business, we are certainly seeing more brokers coming to us with a range of highly complex residential cases and seeking additional support in sourcing alternative forms of finance to service the demands of credit-worthy borrowers who have fallen outside of tightening mainstream lending boundaries.

As such, the reliance on trusted packaging partners is likely to rise in line with this projected specialist lending growth. That means there’s no time like the present for intermediary firms to form an important specialist extension of their business to help service the growing complexity being experienced across the residential mortgage market.

BRIDGING FINANCE

Bridging finance will continue to play an important role in this process, and there is plenty of positivity emerging from the short-term lending market, with bridging applications, completions, and loan books all rebounding significantly on the first quarter of the year.

This is according to recent data from the Association of Short Term Lenders (ASTL), which showed that bridging completions were just over £1.2bn in Q2, an increase of 17.4 per cent on the previous quarter. This means that completions have now been more than £1bn for five consecutive quarters. Within this, bridging applications were reported to have risen considerably, to £7.5bn, an increase of 18.7 per cent compared to the quarter ending March 2022, and the size of loan books has also risen, reaching a new high of just under £6.1bn.

In addition, the latest Bridging Trends report showed that contributors transacted a total of £178.4m in bridging loans during Q2 – 22 per cent more than in Q2 2021 (£146.5m), and up 14 per cent on the previous quarter (£156.8m). Purchasing an investment property remained the most popular use of a bridging loan in Q2, at 24 per cent of total contributor transactions, falling slightly from 26 per cent in the previous quarter. The second most popular use was to chain break – accounting for 21 per cent of total transactions.

These figures demonstrate the resilience, professionalism, and maturity attached to short-term lending, and this is an area that is becoming an increasingly attractive option for a variety of propertyrelated transactions.

COMMERCIAL AND SUSTAINABILITY

Another area of the specialist mortgage market generating plenty of attention in recent weeks and months is the commercial sector, especially when it comes to supporting firms in achieving their sustainability goals.

SMEs are reported to be heightening their focus on finding finance to boost their sustainability, with 65 per cent of commercial mortgage brokers and 76 per cent of asset finance brokers saying they have seen an increase in the number of ‘green loan’ enquiries.

Allica Bank’s quarterly broker survey showed that this trend is being driven by SMEs prioritising the upgrade of inefficient machinery, with 48 per cent of commercial mortgage brokers and 72 per cent of asset finance brokers saying their clients sought finance to help fund these projects. Behind this came buying electric vehicles (26 per cent and 70 per cent, respectively) and improving the green credentials of their existing premises (35 per cent, 28 per cent).

Improving energy efficiency has certainly jumped higher on many SME agendas, and brokers can play an integral role in helping them access the right levels of funding to go greener and fund a number of sustainability projects now and in the future.

E n ergy Efficiency Discount Get in touch 0330 123 4521 cm.broker@shawbrook.co.uk property.shawbrook.co.uk We’re committed to futureproofing landlords’ investments, providing long-term sustainable solutions to improve their energy efficiency. That’s why we’ve launched our new Energy Efficiency Discount, rewarding investors with a reduced arrangement fee for properties with an Energy Performance Certificate (EPC) rating of ‘C’ or above. Banking for the real world.

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