6 minute read
The future of specialist lending
from Specialist Finance Awards
by Key Media
The sector is ready to play its role
SUNDEEP PATEL, INTERMEDIARY SALES DIRECTOR, TOGETHER
The specialist finance market has proven particularly buoyant over the last six months, and, in the face of an increasingly challenging landscape, lenders and intermediaries are expecting the sector to go from strength to strength as the year goes on.
Sundeep Patel, intermediary sales director at Together, shared some thoughts about what lies ahead.
“As a nation we’re currently dealing with the rapidly rising cost of living, the impact of Brexit, house prices that remain high – the list goes on. And historically when we’ve faced difficulties in the UK, high street lending has slowed down and some major banks have adjusted their criteria – preventing countless people from accessing the borrowing they need. But life still goes on; people still go to work, run businesses, buy and renovate homes and investment properties – so where do these customers go if they’re falling short of tightened criteria?
“The specialist lending market is indeed predicted to expand and become even more diverse as it caters to people’s changing needs and circumstances. There are some areas in particular in which we expect to see the industry having a positive impact on borrowers’ ambitions moving forward; brokers and specialist finance providers will need to work together to ensure their clients have access to the right options.”
HOMEBUYERS AND HOMEOWNERS
“We’ve already seen a rise in part-time and flexible contracts, self-employment, and complex income in recent years, which has brought more and more borrowers to a specialist lender, and this is only set to continue; research across various job-posting sites has revealed that a large number of Brits are looking for new, better-paid work and even undertaking multiple jobs to top up their wages amid rising overheads.
“It’s likely people will continue to face difficulties, as mainstream lending criteria often require long-term, fixed employment and limit the use of multiple incomes for affordability. It’s in these cases in particular that brokers may find a specialist finance provider like Together can deliver greater flexibility and products better suited to their clients’ needs.
“Brits are also up against high house prices and rising interest rates, and many will be seeking to avoid the costs and hassle associated with moving (such as stamp duty), preferring instead to make home improvements and structural changes to suit their lifestyle. If these homeowners already have a fixed-rate mortgage in place, it’s often more cost-effective to take out a second-charge loan to avoid losing an existing good rate. Plus, these loans can be taken out with a shorter term, meaning clients might pay less interest overall than if they were to remortgage out of their current deal to raise the required funds. Specialist lenders can also be more flexible if your clients’ income or credit situation has changed since they took out their first mortgage, which is likely to be the case for a lot of borrowers moving forward.
“As interest rates begin to rise, many people are also using second-charge mortgages to consolidate other debts into one payment that might be more economical and easier to manage. It’s already been a huge year for the second-charge market for this reason, and I see no reason for this to slow down anytime soon.
“Clients who do want to buy property should be aware that chain breaks are becoming more frequent, and so are last-minute mortgage application rejections. In such cases, specialist bridging finance could offer an important short-term, flexible finance solution that could repair a broken chain and help homebuyers get the property they want.”
LANDLORDS AND INVESTORS
“As finding an affordable property and obtaining a mortgage continue to prove
challenging, it’s clear that the private rental sector is critical to the UK right now, and intermediaries can help landlords make the most of this growing opportunity.
“According to Rightmove, monthly rent outside London has jumped by 12 per cent to an average of £1,126 per month compared to the previous year, whilst in the capital rents have continued to rise to a record of £2,257. I believe people are keen to get back to the buzz of city life after the last few years, and renters want easier access to transport links and well-paying jobs in the current climate – all of which is driving up rent in London and other major cities. As such, HMOs are still proving popular and generating high yields.
“Many professional landlords will have built equity within their existing portfolio and could leverage this to take advantage of the opportunity and buy more. Your clients could secure a bridging loan against a number of their existing properties and potentially expand their portfolio more than one asset at a time. Once those properties have been acquired and let out, it could prove easier for your clients to secure a mortgage; they’ll be able to use 100 per cent of their rental income to demonstrate affordability, rather than potentially a lower percentage of their predicted income.
“Landlords should also take into account the upkeep on buildings they already own – for example, making energy efficiency improvements to comply with new EPC rating regulations which come into effect from April 2025. To address any required maintenance, landlords could take out a second-charge mortgage or a bridging loan on their buy-to-let properties. Investors are often keen to complete such works as soon as possible – time in which the property isn’t being let out equates to a potential loss in income – and fast, short-term finance lets them get started right away. And with such a strong market and increasing rates, landlords will be even keener to have their properties in the best shape as soon as possible.”
DEVELOPERS AND PROPERTY FLIPPERS
“Over the last six months the specialist lending market has also seen a surge in the uses of bridging across property development and refurbishment, and therefore increased demand for large, multi-million-pound bridging loans.
“Changes to the planning requirements under Permitted Development Rights have made it significantly easier for property investors to turn redundant commercial buildings into profitable large-scale residential projects. And with demand rife for properties suitable for redevelopment, having access to specialist short-term finance has allowed these investors to move with similar speed to that of a cash buyer.
“Many developers have also been looking for a solution to severe project delays, and material and labour shortages; bridging finance to exit expensive development loans has proven particularly popular and of vital importance in cases where additional time is needed to finish the project off or sell the assets.
“Development and refurbishment projects encompass many different stages, and your clients’ finance needs will often change as the work progresses. Over the next 12 months it will be increasingly important to offer an easy transition between products to keep your clients’ projects on track. Specialist lenders like Together can support their next step with a range of refinance and exit options, including bridging loans, commercial term, and buy-to-let mortgages.”
THE FUTURE OF SPECIALIST LENDING
“It’s clear there’s huge potential for growth across the specialist lending market.
“The current situation in the UK is likely to bring challenges for some of your clients and opportunities for others, and the specialist lending sector – with its flexibility and expertise – is critical to supporting them as they navigate the next 12 months and beyond.
“At Together, we’re working closely with our network of packager partners to connect these clients to the funding they need; we have dedicated teams of Specialist Account Managers and Business Development Managers who specialise in complex personal and commercial finance cases, and our experienced underwriters are empowered to make straightforward, common sense lending decisions for every individual’s circumstances.
“These are things you can only truly find within the specialist lending sector.”
