Bridging Introducer June 2021

BRIDGING Champion of the Bridging Professional

INTRODUCER www.sfintroducer.com

June 2021

£5

Life cycle lending LendInvest’s Justin Trowse on holistic solutions and staying steady during turbulent times

 ASTL  Bridging In-depth  Industry Comment

Offer more, for less Get your clients the right deal on their next project, with our new range including: • Rates cuts across all bridging products • Residential bridging at 75% LTV available from 0.75% • Up to 65% LTV for land and commercial

Property finance made simple.

lendinvest.com LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). Your client’s property may be repossessed if they do not keep up repayments on their mortgage.

For intermediaries only.

EDITORIAL

COMMENT

Publishing Director Robyn Hall Robyn@mortgageintroducer.com

Contents

Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com

5 Jonathan Newman Culture matters

Editor Jessica Bird Jessicab@sfintroducer.com

7 Donna Wells Packagers are a vital conduit

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 Campaign Manager Victoria Hubbard Victoria@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com Printed by The Magazine Printing Company, using only paper from FSC/PEFC suppliers www.magprint.co.uk

Keeping the pace

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he most recent data from the Association of Short Term Lenders shows us that new bridging loan applications were up 25.5% in Q1 compared with the same period in 2020. However, the overall value of completions has dropped compared to the previous quarter, as has the value of members’ loan books.

This may be due to growing turnaround times, which are plaguing an already stretched industry and potentially undermining the image of bridging as a speedy solution. Bridging Trends found completion times to be 53 days currently, and the ASTL reports that it is now taking more than £7 worth of applications for every £1 completed.

Some market players might be forgiven, then, for looking fondly towards the winding down of the stamp duty holiday, as one of the numerous factors contributing to a rush on services.

What is clear, though, is that demand for bridging – even when it is unable to provide the same turnaround speeds boasted in years past – is not going to abate any time soon, and that the market must adapt its processes and use of technology to tackle inefficiencies.

This is particularly true as bridging is becoming increasingly understood for its value in a wide range of circumstances, including its role in getting preconstruction projects off the ground, and in a wider sense, to tackling issues such as the housing crisis and climate emergency.

As this becomes a more mainstream option for all types of borrowers, the market must make sure it can keep up. B I

9 Jason Berry Permission granted for bridging boost 11 Steve Smith Three reasons bridging beats second charge 13 Brian Rubins Commercial bridging, the missed opportunity 14 Feature: Steady at the helm Jessica Bird speaks to Vic Jannels about his time so far at the ASTL, and where the short-term market stands now 20 High risk, high reward This month’s round-table looks at the complexities and benefits of pre-construction lending, and the future of development in the UK 26 Lifecycle lending Justin Trowse discusses LendInvest’s approach to turbulent times and the growing status of the bridging market

32 Rising demand The ASTL’s most recent data set shows an overall growth in the market in recent years

Simple bridging you can rely on www.sfintroducer.com

JUNE 2021 BRIDGING INTRODUCER

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BRIDGING FINANCE

Bridging finance made simple If your customers need a short-term solution for their financial goals, our tailored range of bridging loans could provide the answers they need.

Here’s how we could help: Regulated and non-regulated loans Rates from 0.49% Standard and light refurbishment products included Up to 65% LTV Wider choice of property types accepted including HMOs and new builds Refurbishment buy to let offering available: One application form for two loans, one for bridging finance and one for buy to let

FOR INTERMEDIARY USE ONLY.

precisemortgages.co.uk

Precise Mortgages is a trading name of Charter Court Financial Services Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register Firm Reference Number 494549).

Registered in England and Wales (company number 06749498). Registered office: 2 Charter Court, Broadlands, Wolverhampton WV10 6TD.

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Contact your Specialist Finance Account Manager today

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MARKET XXXXXXXXX

Culture matters – here’s why Jonathan Newman senior partner, Brightstone Law

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hat makes your business different to your competitors’? Is it the products and services you sell? Probably not – products in financial services are devastatingly easy to copy, so if you do have something that’s both market leading and profitable at the moment, the chances are that it will attract direct competition before too long.

So, is it the quality of the service that you offer? Again, this can be a differentiator and it is vitally important, particularly in short-term lending, but it is not unique to your business.

Everyone aims to deliver great service and many businesses succeed.

UNIQUE CHEMISTRY

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The single most important element that makes your business different to that of your competitors is the culture. This is the unique chemistry and way of doing things that no other can copy – it’s how you behave and engage as a collective.

It might seem whimsical for a lawyer to start talking about culture, but it’s really important.

According to a report in the Havard Business Review, strategy and culture are the primary levers available to business leaders in improving the effectiveness of their organisation.

Throughout the pandemic, maintaining a successful company culture has, of course, been far more difficult, as remote working presents a number of challenges to developing communication and communal behaviours. This is dangerous, as it encourages a more homogenous, process-driven way of working, which www.sfintroducer.com

may get the job done, but adds no real value to anyone.

At Brightstone Law, we’ve been very conscious of the importance of our culture and its role in the success of the firm.

We pride ourselves on pushing boundaries for our clients, creating precedents and setting new standards for good practice, and this has made us very successful.

CULTURE CLUB

According to the results of the annual Hazelwoods/Lloyds Banking Group Financial Benchmarking Survey, we have again outperformed all competition in the legal sector in key indices, delivering double the industry average on profitability.

Our culture has been integral to achieving this, and so we have launched a programme that will help us to identify and articulate that culture.

The programme is called ‘Culture Club’ and it’s managed below partner level with its own independent budget and objectives.

Culture Club had a mission to create an environment of greater pastoral care, promote equality and diversity, and to identify, protect and promote the unique culture that has made Brightstone Law so successful.

Most recently, the club has run a number of initiatives in line with Mental Health Awareness Week and marked National Receptionists Day by celebrating our own receptionist.

Karen has been with the firm for 25 years and is our front line, regularly singled out by callers for her manner and helpfulness in an increasingly artificial intelligence (AI) world, so Culture Club arranged that her role, often underrated and forgotten from within, be celebrated and her qualities recognised. Staff took time out to let her know, verbally and in writing, why she is important to us and the business.

These may seem like inconsequential activities, but they bring people together and develop the culture.

It’s been a great way of re-engaging everyone following an extended period of remote working, and we are already seeing the benefits.

As the running of Culture Club is independent of the firm, with no partner involvement in the decisionmaking process, it provides a great development opportunity for individuals to take a leadership role in driving the firm forward and making a tangible difference.

STRENGTHEN AND EMBED

By better defining and articulating our own culture, we also have a clearer idea of the type of people we want to attract when it comes to recruitment.

Similarly, potential candidates can get a better insight into what it’s like to work here. Recruiting people aligned to our culture serves to strengthen the culture and further embed it over time.

Culture is also, of course, an important consideration when it comes to choosing the businesses with which you partner. The culture of an organisation is the clearest possible window into how they will engage with you and your business.

For example, partnering with a law firm that robotically processes actions and transactions, has its merits on the surface. The job gets done and can be moved off of the desk. Often, however, this process-driven approach misses the real opportunity to do things efficiently, effectively and in an individually crafted manner – in reality, no two matters are ever the same.

Partnering with a firm that has a culture of empowering its people and challenging the status quo could be far more beneficial if it promotes a more creative way of tackling challenges that gives your business the competitive advantage.

In a competitive market, finding a way of standing out isn’t always easy.

But if you can identify the behaviours in your business that make you successful, and work with partners with a strong and distinctive culture, you can give yourself an advantage that isn’t easy to copy. B I JUNE 2021

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Specialists in Buy to Let We specialise in all types of Buy to Let property loans including holiday lets, HMOs and residential Buy to Let.

Our BTL TermTen structured product offers up to 75% LTV with fixed rates for the initial 2, 3 or 5 years, and our BDMs can offer instant terms up to £500,000.

Our bridging products offer up to 80% gross day one LTV, with rolled-up or serviced interest options and a guaranteed exit underwritten as part of the bridge.

We’ll consider applications from: • Experienced landlords and first-time landlords • Limited companies, SPVs and offshore companies • Ex-pats and foreign nationals

Call us on 0345 241 3079 Visit www.castletrust.co.uk Castle Trust Bank means Castle Trust Capital plc, a company incorporated in England and Wales with company number 07454474 and registered office at 10 Norwich Street, London, EC4A 1BD. Castle Trust Capital plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under reference number 541910. Buy to Let is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

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PACKAGERS XXXXXXXXX

A vital conduit Donna Wells director, First 4 Bridging

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e fully expected 2021 to be hectic, and this has certainly proved to be the case, maybe even more so than we initially predicted.

As a business, we have experienced some record months over this period.

These volumes have largely been driven by the juggernaut that is the purchase market, and with the lending capabilities – and willingness – of some traditional institutions still limited, there has been an increased emphasis on alternative, specialist and short-term solutions for a variety of residential property acquisitions.

There has also been huge uplift in activity levels across all areas of the buy-to-let (BTL) sector, as a range of investors continue to take advantage of favourable market conditions, highly competitive rates and strong service levels, especially from specialist lenders.

Growing numbers of landlords are turning to these kind of specialist offerings as they look for additional flexibility on how interest is serviced, and for lending decisions based on some unconventional circumstances.

Additional complexity throughout the lending marketplace also means that more intermediaries are turning to packagers for support when placing less than straightforward cases, and this is a trend which we expect to continue.

POPULAR USES FOR BRIDGING

Focusing on short-term finance, as an adviser it’s always prudent to keep track of how this is being utilised.

According to the recent Bridging Trends report, the most popular use of a bridging loan for the second consecutive quarter was to fund a chain break, at 20% of all loans in Q1 2021.

Purchasing an investment property was the second most popular use in www.sfintroducer.com

Q1. In addition, the report revealed an increase in demand for bridging loans for business purposes, from 10% to 14%, as businesses ready themselves for lockdown restrictions easing.

Other significant results highlighted in the report were: average loan-tovalues (LTVs) rose to 55.2% from 51.3% in the previous quarter; the average weighted monthly interest rate went up to 0.74%, though remained cheaper than pre-COVID levels (0.80%); the average bridging term climbed to 12 months, falling in line with the same quarter in 2020; and the average completion time increased to 53 days, the highest figure recorded since Bridging Trends launched.

The report also highlighted how bridging finance continues to be an increasingly attractive proposition for those buyers who are looking to save their delayed property purchases.

In terms of criteria searches made by bridging finance brokers during the first quarter, ‘maximum LTV’ was the most popular term, followed by ‘regulated bridging’ and ‘minimum loan amount’, according to additional data supplied

by Knowledge Bank.

THE IMPORTANCE OF PACKAGERS

For brokers who may not specialise in what continues to be a hugely complex lending environment, it’s not easy to realise exactly what borrowing scenarios any given lender will accept and what they will reject, or indeed to gain access to all the products that are available in the market.

Of course, lenders are constantly trying to communicate any changes to their product ranges and tweaks to their criteria to the intermediary market, but if brokers are not writing regular business in the short-term finance sector, this messaging can often get lost, or soon become outdated.

This is why they have become so heavily reliant on the expertise and experience offered by packagers and specialist distributors.

For packagers and specialist distributors operating in the modern

market, it’s all about adapting and evolving to ensure we are constantly delivering the right results in the most secure and efficient manner possible.

SPEED AND ACCURACY

Here at First 4 Bridging, we recently partnered with Nivo to deliver a secure instant messaging and document gathering service for our growing number of intermediary partners and introducers.

The service helps advisers to navigate the requirements for certified ID, usually provided by a solicitor.

Clients can e-sign documents, upload payslips and verify their identification using Nivo’s facial recognition process to simplify and speed up the application process.

Speed, accuracy and transparency are key factors in successfully maximising the benefits attached to a range of short-term solutions.

Packagers can also greatly reduce borrowing timeframes. For example, our average submission to completion time is significantly less than the 53 days uncovered by the Bridging Trends report.

This is just one of the reasons why packagers will remain a vital conduit in helping intermediaries and their clients to achieve their propertyrelated goals over the second half of 2021 and beyond. B I

2021: A year of record volumes

JUNE 2021 BRIDGING INTRODUCER

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DEVELOPMENT XXXXXXXXX

Permission granted for bridging boost Kris Corns operations director, Crystal Specialist Finance

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ermitted development (PD) is evolving, and this can only be good news for brokers.

The initial rules, which came into effect at the start of September 2020, meant full planning applications were not required to demolish and rebuild unused buildings, as homes, commercial and retail properties could be quickly repurposed in a move designed to revive high streets and town centres.

In addition, homeowners were also able to add up to two storeys to their home to create new housing or more living space through a fast-track approval process.

The government is not stopping there. There was more positive news in March this year, when it was announced that, from August, PD rights in England will additionally allow change of use from commercial, business and service (Class E) to residential use (Class C3) without requiring planning permission.

This ultimately allows more premises to bypass normal planning procedures to be turned into homes.

So, why is this good news?

FREEDOM TO BUILD

When the original permitted development changes were passed in 2020, many were optimistic about the potential this could offer homeowners and developers when renovating or extending their home, investment property or property portfolio.

This optimism came to pass.

At Crystal, and as witnessed through the market as a whole, we have been inundated with bridging loan enquiries from landlords and developers looking www.sfintroducer.com

to develop existing buildings or buy additional properties for light, medium or heavy refurbishment.

Homeowners have played their part too, and we have seen funding applications for rear, side, wraparound, and two storey extensions, as well as garage conversions.

It’s clear that landlords, developers and homeowners are taking advantage

“We are certainly seeing brokers who previously would not have entertained a bridging facility now opting for it as an outcome for their clients” of permitted development rights to save time and money by avoiding the need for planning permission.

A PD scheme also offers much more freedom in relation to the build, both internally and externally.

But ultimately what does this mean for the broker?

EXTENDING OPPORTUNITIES

Putting residential opportunities to one side for now, the new permitted development rules have taken a relatively small number of buildings and opened up the property opportunities they present considerably.

The chance to take an existing commercial, business and service use structure and turn it into a home, either to sell or let, will see a big increase in purchase demand.

The key short-term finance requirement will be in helping the purchaser secure these available commercial buildings in a timely manner. Whether through traditional estate agency or auction routes, the ability to have an offer accepted and secure finance to complete the deal quickly will be paramount.

Permitted development will deliver more homes

To be of major interest to the homebuyer, it is most likely that the building in question will already be owned and inhabited, which means completing the refurbishment as fast as possible is key.

BRIDGING AT THE CORE

The COVID-19 pandemic has hugely impacted the high street and large retail units, and through permitted development the government will undoubtedly deliver more homes.

At Crystal Specialist Finance, we are certainly seeing brokers who previously would not have entertained a bridging facility now opting for it as an outcome for their clients, with clients themselves also noticeably much more receptive of the bridging mechanics.

Yes there are higher costs, but these are not prohibitive.

The bridging market is now as competitive as it has ever been, and of course interest has to be a major consideration, alongside the importance of a plausible and validated exit, but these are now equally matched by the speed and flexibility that is required to deliver customer objectives.

For brokers specifically, permitted development schemes can offer an easy transaction with no major difficulty in terms of having to understand the nitty gritty of full planning permission, and what used to be the lengthy processes involved in getting it.

The demand we have seen for permitted development projects is due to soar even higher throughout this year, so let’s ensure that bridging remains a core financial consideration to meet the clients’ requirements. B I JUNE 2021

BRIDGING INTRODUCER

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Standard case?

Complex case?

Every case is different.

Time for lending less ordinary.

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romafinance.co.uk 02/06/2021 23:40:04

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PRODUCTS XXXXXXXXX

Three reasons bridging beats second charge Steve Smith national sales manager, Roma Finance

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he specialist lending market is complex by nature, and underwriting some cases is as much art as it is science.

There’s also a degree of overlap between some products, where your customer could fall into either category depending on the details. This means that working out which product is most suitable isn’t always as easy as in the mainstream mortgage market.

BLURRED LINES

Bridging and second charge mortgages are good examples of products that are clearly different but can sometimes be used for similar cases.

Specialist brokers will tell you they often encounter customers who want a bridging loan, only to find a second is more suitable – and vice versa.

This all goes to highlight the value of good specialist advice.

Let’s be honest, it probably doesn’t matter to the borrower whether it’s a second charge mortgage or a bridging loan, as long as it’s competitive and meets their needs.

As a broker, you need to start with your customer’s circumstances and without a preconceived idea of what they need.

If you aren’t experienced or confident in specialist lending, no problem – a packager will do the sourcing for you.

circumstances a second charge mortgage can be more suitable.

They are both quick finance options and both have their pros and cons, but here’s why you should consider an unregulated bridging loan over a second charge mortgage: MORE FLEXIBLE FUNDING

With a second charge mortgage, your customer gets a lump sum on completion, and they pay interest on that sum from day one.

Bridging finance is much more flexible, because it can be structured in the way that best helps the borrower.

The interest can be deducted, serviced or even rolled up. On development projects, for example, we can also give the borrower funds in tranches, maybe £100,000 on day one and the rest as and when they need it.

Importantly, this means they only accrue interest on the money they draw down at the time, not the whole amount. This can hugely reduce the interest payable and cut overall costs.

ROLL UP THE INTEREST

As well as drawing down funds when you need them, interest can be rolled up on a bridging loan, providing clients

with huge advantages where cashflow is an issue.

If your customer doesn’t want to, or can’t, pay monthly interest, a bridging loan gives them the ability to repay the interest at the end of the term alongside the original sum borrowed.

We can also be more flexible on terms, with loans from three to 24 months with no early repayment charges (ERCs).

LENDING ON NON-STANDARD PROPERTIES

With a bridging loan your customer can access finance for a wider range of non-standard properties than with a second charge mortgage.

At Roma, we’ll lend on run-down auction purchases and uninhabitable properties, along with commercial and semi-commercial properties and land with development planning permission on a first charge bridging basis. Second charge lenders often stick to residential.

We can also use multiple property types as security in order to make a loan viable.

Specialist lending relies on expertise and experience over algorisms and automation, which means the sector is more complex, but it is also much more flexible.

By listening to your customer’s needs first, the product type should naturally follow, whether it is a second charge, a bridge or something entirely different.

And if you aren’t sure of the best option, there’s lots of support available from lenders and packagers. B I

BRIDGING BENEFITS

As a short-term finance lender, we have real-life experience of the benefits of bridging and how it helps our customers fulfil their property goals. But we know that in many www.sfintroducer.com

Bridging finance an be structured in the way that best helps the borrower

JUNE 2021

BRIDGING INTRODUCER

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COMMERCIAL XXXXXXXXX

Commercial, the missed opportunity!

Brian Rubins executive chairman, Alternative Bridging Corporation Limited

S

o many lenders and brokers do residential, but what about loans for commercial property, the missed opportunity?

First, it is important to agree the meaning of commercial. To some it is shops, factories, and offices, but others include in their definition residential investments, houses in multiple occupation (HMOs), blocks of flats and buy-to-let (BTL) properties.

Perhaps it would be easier just to say ‘everything except owner-occupied residential properties’ and unlock a huge market with a limited number of brokers who focus on commercial loans.

Commercial loans can be made to investors, entrepreneurs and the business community for purchase, refinance and to raise working capital.

The bridging market can accommodate loans from a few hundred thousand pounds to £5m or even £10m.

It can ease the pressure of completing an auction purchase, but equally there is the need for short-term loans to repay expired facilities where the lender does not wish to renew, or which are pending new lettings or planning permissions being negotiated.

High street lenders are not relaxing their criteria; indeed, our experience is that mainstream underwriters are being more and more demanding before parting with cash.

Commercial bridging can satisfy these circumstances until everything is spick and span.

It is best to focus on the positive, and to save time by identifying what is not likely to be financed by bridging.

Cinemas, trading filling stations, night

www.sfintroducer.com

clubs, football stadiums, kennels and equestrian facilities are usually on the ‘no’ list, and rather than trying to cajole a lender to change their policy, accept that square pegs do not go into round holes and concentrate on the business that can be done!

Similarly, it is essential to recognise that maximum loan-to-values (LTVs) are 65% to 70%, because anything more will present a refinance problem at the end of the term.

However, our experience is that this satisfies most applications, or that additional security such as a second charge on another asset can often be found to make up the shortfall.

SHORT OR LONG-SIGHTED?

Some bridging lenders are reluctant to make loans in excess of 12 months, or do not have a suitable internal funding structure to be able to do so, and while they may provide a quick fix, they do not satisfy the borrower’s need to have sufficient time to improve the property or establish income before seeking long-term refinance.

Surrendering to a lesser period than needed is short-sighted and likely to incur extra cost by needing to refinance the first bridge before being able to negotiate a long-term loan.

It is important that the lender and borrower each have a clear view of the strategy and, where necessary, agree a loan for up to 24 months at outset.

Lenders with a wider range of products also offer interest-only term loans for periods up to five years. Here, the lender provides an open-minded approach and includes a built-in funding option to cover the period until the property is self-financing.

This is a useful facility for properties such as student accommodation and hotels, where the income needs to be stabilised before refinance into the mainstream can occur, and this cannot be achieved with a bridging loan.

Flexibility is often touted, yet rarely provided, but we believe the Alternative Overdraft does just this.

It is secured by first or second charge over under-utilised property assets and allows the borrower to agree a limit and draw against it, time and time again, repaying or reducing the loan in line with funding needs while only paying interest on the balance outstanding.

DIVERSE OPPORTUNITIES

COVID-19 has caused lifestyle changes, and in particular in the past year, staycation assets have become a popular investment, be it just a few flats or something more substantial such as a ‘holiday village’.

Here we are experiencing the need for purchase or refinance loans with an additional sum for improvements, converting to a term loan on completion of the works.

For property investors and developers, loans can include funding for the purchase or refinance and a facility to pay for improvements.

As liquidity for the next project often needs to be addressed, these arrangements can also include a topup loan on completion of the works, enabling the owner to extract all or part of the equity, ready to invest in another opportunity before refinancing.

Commercial lending is diverse.

Recently we financed a large portfolio of small commercial and residential investments, a group of local supermarkets, and residential development sites. We have also loaned against a large, vacant retail store while it was being fitted out for a new tenant, and a pre-let retail park while planning permission was finalised where we went on to provide the construction finance for it to be built.

We have also refinanced a number of hotels, including one where the borrower was able to benefit from substantial debt forgiveness if a demanding timescale could be met.

The opportunities are endless, and although it may take time to learn the skills to take advantage of this market, forward thinking lenders will work closely with brokers to capture opportunities which might otherwise go unsatisfied. B I JUNE 2021

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FEATURE REVIEW

ASTL XXXXXXXXX

STEADY AT THE HELM Jessica Bird sits down with Vic Jannels, CEO of the ASTL, to look back at the first 18 months of his tenure, and consider where the market stands now

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n January 2020, Vic Jannels took up the mantle of CEO of the Association of Short Term Lenders (ASTL). Within a matter of months, however, the outlook for both the market and the wider world would take an unprecedented turn.

Jannels spoke to Bridging Introducer in June 2020 about the challenge that lay ahead of him in navigating through this storm. A year later, he reflects on the trials, successes and surprises experienced since.

Last June we discussed how it was an interesting time to have taken the helm of the ASTL, how has it been since then?

Obviously I had a lot of ideas, plans and thoughts about how I could move the ASTL forward. The plan was not to be radical or change what Benson Hersch had done, but to move on to the next phase, where anybody looking to use a member of the ASTL would know that basically it did what it said on the tin.

It was an enormously creditable organisation, it now needed to start looking more at widening its membership, its remit, and having more influence in the short-term lending sector.

My plans were to bring the ASTL forward by making it more visible and more approachable, and particularly to encourage non-members of the benefits, for them and more importantly for their customers.

Of course, it was then difficult to get out and meet people, because almost at the start of the year we hit lockdown. However, I found a lot of people were prepared to work with virtual meetings, and we were able to bring groups together to have those conversations. That all worked very well, but it didn’t allow me to do what I’d hoped, which was get around

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BRIDGING INTRODUCER JUNE 2021

the country and meet not only our existing members, but encourage more to come on board.

Nevertheless, there were a lot of meetings virtually with potential new members, and existing members as well, who really wanted to comment on the marketplace and seek information from others even when they couldn’t actually sit at a table with them.

Are you in a good position compared to what you expected at the beginning of 2020?

We are certainly in at least as strong a position as the ASTL was this time last year. I would argue that we’re in a much stronger position, because we were able to take the time to do other things.

When the government started allowing borrowers to have payment holidays, that was obviously going to have quite a big effect on the short-term lending market. Also, there was the issue of members not being able to follow through with taking delinquent borrowers to court, for example.

We were able to start looking at how we could engage with the Treasury, and indeed our colleagues at the other trade bodies, and establish a way of best protecting our membership, whilst remembering the requirements of the borrower.

So, although I couldn’t do what I’d originally planned, there were plenty of other things to do which were meaningful, and I hope valuable, to our membership.

Has your engagement with the Treasury helped showcase the value of the association?

It has shown that we have teeth. We’re able to talk to people at a level which maybe hadn’t happened before. www.sfintroducer.com

FEATURE REVIEW

ASTL XXXXXXXXX The engagement that we had in the third and fourth quarters of last year with the Treasury was really quite encouraging. It was patently obvious that the people we spoke to – who were very interested and concerned – were not aware of the value the short-term lending sector brings to the mortgage market. In fact, when we started talking about the contributions of somewhere between £4bn and £5bn a year, just from within the membership, they were staggered.

We then had subsequent exchanges with questions about how the sector worked, what the benefits were, and what the longevity was. That was quite encouraging, and I do believe people recognised that there was a valuable part for us to play in helping them moving forward.

the whole of its affairs. It is such a huge piece of the mortgage market, and it probably needs to have clout in terms of the way in which it’s controlled – clout that reflects its actual contribution to the economy.

Are historical misconceptions about bridging changing now?

Historically, bridging has been looked at as an absolute last resort. The view, incorrectly, was that it was expensive and going to drain money out of the deal, without actually recognising the part it played in getting the deal to market.

Of course, the large number of additional lenders which have entered the market over the last few years has driven competition, and therefore rates have →

Do you think the specialist market should be more heavily involved in influencing policy?

Yes, and it’s something very close to my heart. I want to bring in a wider audience in terms of those who are heavily influential in the sector – the Association of Mortgage Intermediaries (AMI), the National Association of Commercial Finance Brokers (NACFB), the Financial Intermediary & Broker Association (FIBA).

The knowledge that these groups bring together cries out for increased education, to the borrower, the introducer, the lender and the government.

It would be sensible for the regulator to look at the specialist market and to recognise the influence and the contribution it makes to the UK. I am already working quite closely with FIBA. Our next conference is going to be looking particularly at education and training.

We’re also going to be looking at one of the subjects which has come up in the last few months, which is the non-disclosure of procuration fee payments by lenders to the end user. This is going to be a growing issue.

Regulation, in my opinion, should have encompassed what we now know as non-regulated mortgage business right at the outset in 2004, because then there would have been the same playing field, no matter what the deal.

In the run up to regulation, one of the things I said – and I was not a lone voice – was about regulating the whole mortgage market, not just part of it. It would have made life simpler from day one, and therefore maybe not led to the issue we’re facing right now.

It’s about ensuring all participants in the market don’t leave themselves open to retrospective questioning and claims. The regulator historically has never put a line in the sand, so it will judge a complaint relating back 10 years on today’s rules.

In my personal view, every mortgage deal should be written as though it’s regulated. You can’t cut corners when dealing with a client’s financial life.

So yes, I think the specialist market probably needs to be in a position to ensure that it manages www.sfintroducer.com

Vic Jannels

FEATURE REVIEW

ASTL XXXXXXXXX had to come down in order to keep market share. Also, the quality of the way that the business has been written in recent years has improved dramatically, and that needs recognition and understanding.

What have you learned as an individual over the past year, and what has the key lesson been for the short-term market?

What I have learned is that, although there was a mystique about short-term lending, in reality it’s very little different from any other form of mortgage lending. It’s just about the way it’s brought to market, the term over which it’s written, and the requirements of a lender to ensure they’re dealing in a way which enhances the ability to achieve the required exit at the right time.

The variety of underwriting, which was considered to be seismic in years gone by, has scaled right down.

My learning in terms of the underwriting is that it is actually exactly as it should be – it’s appropriate, because if they get it wrong they’re not only getting it wrong for themselves, but for the client.

The processes are robust, the outcomes are 99% of the time good, and that’s no different from the wider mortgage marketplace.

There is an evolving, continuing upskilling of the processes, in order to ensure that the bridging sector isn’t leaving itself out on a limb, and it’s doing its job in exactly the way that it should for stakeholders.

As for the market, I think the sector was already strong, it was buoyant, and becoming more so.

The ravages of the pandemic have encouraged people to look more at this market in order to assist them at a time when term lenders were really hampered by a whole raft of things, including a lack of valuers and lots of people being furloughed, or having to work from home if they were retained, which had the effect of slowing that market down quite dramatically.

This was a boon for short-term lending, because it meant they could step in and write more business.

Will that continue as we emerge, now that people see bridging as a useful tool?

I think we’ve got to wait a period before answering that. None of us know yet what the lasting effects of the pandemic will be. Although the signs are good at the moment, we don’t know, when furlough ends, what the level of redundancies are going to be.

If you walk through most town centres at the moment there are lots of shops closed, and in hospitality lots of pubs may well not reopen, so we don’t know yet what the long-term effects are going to be. That may take a year or so to unfold.

I suspect that lending in the short-term area will continue to grow in the foreseeable future, but I don’t

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think that’ll be the end of it. As more competition comes into the sector, the products and offerings of short-term lenders will provide a much quicker turnaround, particularly if you look at the auction sector, and certainly from a development perspective.

I see bridging becoming a very important part of that jigsaw long into the future.

I also think more lenders will come back to market with bridge-to-let options. This is where somebody buys a property which needs work before it is suitable for letting, they have a bridge and then that same lender turns that into a term BTL, based on the original valuation, with the potential upgrade matching what was necessary for making a property suitable.

I think that’ll widen, as more lenders will see the value of built-in exit routes. The advent of competition driving interest rates down has meant that often they want to retain a client for longer. I see that widening out as we move forward.

On the subject of competition, some are concerned that the influx of newer lenders, offering flashy, tech-driven propositions, isn’t sustainable or realistic.

What do you think?

As with any new entry, you’ve got to have a route to market which attracts people’s attention. I suspect that will be the same with the new lenders, because gradually even the old ones are moving over to technological solutions.

For the high street lenders of old, their original method was to sit a customer down and go through the fairly lengthy process of the legals, valuations, etcetera. The reality is that as tech takes more of a hold on our lives, these things will have to speed up.

So, you’ll find new lenders coming to market, all singing all dancing, but able to do the job they say they’re going to do, and the traditional lenders are going to have to upskill to be able to match those turnaround times.

A lot of lenders these days have open banking, online ID apps, desktop valuations, and all the other bits and pieces. There’s absolutely no reason why they shouldn’t match the speed of the new lenders. It is an investment, but at the end of the day the investment will always be a necessity.

Has the bridging market’s relationship with technology changed, or is it still fundamentally a personal business?

The nuances of bridging are often totally different to the traditional house purchase or remortgage.

I’ll give an example of a current matter, where a customer’s property is on the market for approximately £1.9m with a £400,000 debt. During the pandemic, he took advantage of payment holidays, and his company took advantage of the Coronavirus → www.sfintroducer.com

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FEATURE REVIEW

ASTL XXXXXXXXX Business Interruption Loan Scheme (CBILS). Now he’s trying to sell his property, but it needs quite considerable upgrades.

His agent told him that if he spends £150,000 on upgrading, he can add another £400,000 to his price, but because of the payment holidays and government loans, unfortunately lenders look at him askance when he wants to raise £150,000 in the short-term.

This is a classic deal for bridging, and in order to understand all of the reasons, I believe it’s a faceto-face conversation rather than something on a technology platform.

There will always be a myriad of cases where that face-to-face conversation, even if it is virtual, is needed.

The other thing is that you build a rapport that way, and from both a lender’s and broker’s perspective, that could quite easily lead to more business.

Tech-based mortgage applications will grow – potentially exponentially – but I don’t think the growth in the face-to-face will fade away. As the younger group comes through into our sector, or as consumers, maybe in the long-term the meeting of minds across a desk will potentially vanish, but I don’t think that’ll happen any time soon.

well embedded. The fact that we’re now utilising their skills to lend the money on a shorter-term basis will always be incredibly valuable, and can only serve to assist in the growth of the sector.

Although we lost a lot of lenders in the Credit Crunch, that was possibly due at the time to their very relaxed attitude to lending.

This time around, that hasn’t happened, and lenders are very, very capable and careful of managing their affairs. So, regardless of what happens next, I think all sectors of the market, including short-term, are ready to adapt, and do so quickly.

One of the things that is quite startling in supporting that is the technology subject. It simply allows the market to change much more quickly than when it was manual. You can adapt your technological processes – as long as you’ve got the right people managing it for you – really quickly. In which case, you can take advantage of changes as they come and ensure you’re still at the forefront.

Another key trend is the fate of the high street, city centres and office-dense spaces. What does this mean for the specialist market?

Absolutely. There were a number of lenders that exited really quickly at the start of the recession, because they could see the future didn’t exist for them.

Those lenders which remained – at that time mostly the traditional high street lenders and building societies – took the brunt of the pain and learned from the mistakes that had been made previously.

As we said, a lot of those people are now in the specialist lending sector, so they’ve brought with them that knowledge. Their resources, processes, and understanding of credit is much more robust and appropriate to where we sit today.

Even prior to the pandemic, high streets were becoming a little sparse. A lot of the regular stores were already showing signs of exiting. I don’t think we can blame that in its entirety on the pandemic.

What the pandemic has done is speed the process up. Again, we’re really not going to know what the medium to long-term effect is for a while yet.

My worry is, with all the stores having come in and are now exiting, the town centre itself may be becoming a little ghost-like. That is a worry for most smaller towns around the country.

The alternative is that some of the offices, under the new rules of permitted development (PD) may well be converted into flats. I’m not convinced that’s a bad thing, because it does bring people back into that area.

What does it mean for short-term lending? Business will be enhanced, because more and more people, who have got the ability to work on these premises and turn them into other uses, will want that funding long into the future.

What about this market helps it adapt to those kinds of changes and trends when they do appear?

Quite a lot of the people in positions of control within the short-term market cut their teeth in the traditional market. Their experiences of traditional lending and the requirements of credit and risk control were already

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Do you think the strength of the market this time around has been because of the lessons learned during the Credit Crunch?

There are clearly a lot of strengths to discuss, but what are some of the shortcomings this market needs to work on?

One issue is the length of time it takes for a lender to issue an offer. In the short-term lending world, going back a few years, you would get a deal through to completion potentially in a matter of days.

I don’t think there’s any secret that bridging now can take an inordinately long time. I saw a report some time ago which said you could now be looking at anything up to 52 days.

One of the issues caused by that is that a broker looking after the best interests of their client might go to a traditional high street lender and put in an application, which may take up to three months to get through to completion with the lack of valuers, the deadlines for stamp duty causing a number of firms not to take on business, and so on. So, the broker will put together a bridging loan, and the client is www.sfintroducer.com

FEATURE REVIEW

ASTL XXXXXXXXX potentially paying out a valuation fee for the traditional lender and for the bridging lender, maybe some broker fees and various other bits and pieces to go with it.

The broker is feeling comfortable because he’s got a very nice deal facing him, but because the timescale of bridging has increased so much, it may well be that the term loan completes first.

For a lot of bridging lenders, due to the pandemic, completions perhaps are not at the level they would have expected versus the number of applications.

That’s something which needs to be resolved, putting the deals through much more quickly, as that was bridging lenders’ original reason to be there.

When I talk to members of the ASTL, they’re endeavouring to do just that, but can be hampered by the issues of valuations, and so on. I’m not laying the blame at anybody’s feet. In fact, lenders in my opinion are doing as good a job as they’ve ever done in terms of turning the application round, but then from there the process begins. It’s things which are quite often out of their control that elongate the process.

It would be nice to think that the advent of technology, open banking and all of those things, will serve to speed the market up again.

What would you say to brokers looking for the right lender to work with?

The important thing for a lender, whether electronically or physically, is communication – it needs to be quick, accurate and on point.

That can be helped dramatically by a good business development manager (BDM) who knows their subject, product, and underwriting requirements inside out and is prepared to go the extra mile.

There are a fair number of lenders out there in the short-term sector which provide that support level.

It’s invaluable, because often the broker needs to be able to get comfort and support from the lender as quick as humanly possible to keep everybody happy in the chain.

My view is that the majority of the lenders that I work with at the ASTL provide that kind of communication, though I’m not saying that the others don’t.

What is the role of the ASTL in nurturing those positive practices?

In terms of communication, what we have done is launch a newsletter in the second quarter of last year, where we comment on market trends and invite our members to talk about things which are important.

We also have our regular surveys which look at trends, so that we can give members an idea of what the wider market is doing.

We’re also in the final stages of revamping the rules and Code of Conduct to make it a bit more user-friendly. www.sfintroducer.com

From a broker’s perspective, what they want is a lender which responds to them quickly, gives them a concise idea of what’s needed to take the deal through to the next stage, and unless anything comes out of the woodwork, to then move forward.

A broker wants a lender to be available, knowledgeable, and quickly responsive. Most lenders in the bridging sector will provide that kind of return.

The last thing I would ever do is comment that any lender outside the ASTL doesn’t follow a similar structure. Membership just means we have vetted them, and all parties involved in the transaction know that they’re going to be looked after each step of the way.

The other thing is that we have the ability – because members have signed up to it – to investigate a complaint fully and thoroughly. That should be a comfort to the broker when they’re making a recommendation to the client.

Finally, although we never tell our lenders how to lend their money, we encourage that any default rate should not exceed a set figure.

Other than the revamp of the Code of Conduct, is anything else coming up for the ASTL? One of the things we’re doing is to embark on a programme with the national press, having people actually talk about bridging, short-term lending, development finance, and so on.

Consumers will read about the ASTL and its membership abiding by a Code of Conduct, so when their broker introduces them, at some point the customer is going to have heard about it.

It’s about education and awareness, and widening out our remit with the press. It’s time that the whole picture of short-term lending should be widened.

Shorter-term, as soon as we can, we’re going to reintroduce regional and localised member meetings, so that we can find out what drives them and what they want from us, and can work on that together.

We’re doing joint events with FIBA in order to widen our joint influence, particularly in the training and development side. I also have fairly regular conversations with AMI and the NACFB, to see what we can do to work alongside each other whilst still retaining our independence, and to better serve our various members in their different guises.

What message do you have for the market?

We’re going to have to wait a while to fully understand exactly what’s going to happen in the medium to long-term as far as the financial impact of COVID-19.

However, as always, the consumer remains the most important part of the chain. All stakeholders should strive to serve them well, which will protect the growth we seek long into the future. B I JUNE 2021 BRIDGING INTRODUCER

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HIGH RISK, HIGH REWARD Jessica Bird outlines the discussion at this month’s roundtable, which looked at the complexities as well as the benefits of pre-construction lending, and the future of development in the UK

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re-construction lending can be a lynchpin for whole-of-market lenders looking to feed cases through from cradle to grave. For those that cater to this side of the market, it can therefore form part of a holistic approach to lending.

However, there are considerable risks and complexities, not least the changeable nature of demand and market conditions following the pandemic.

The latest Bridging Introducer round-table brought together experts from LendInvest, Howard Kennedy, Bridge Development, Roma Finance, Shawbrook Bank and Movin Legal to discuss the realities of preconstruction lending, and its role in the future of the wider specialist market.

RISKS, REWARDS, REALITIES Daniel Underwood, director of credit risk at LendInvest, explains that for a lender with propositions in development finance and buy-to-let (BTL), preconstruction lending can be an important starting point.

However, it necessitates careful understanding of the details of a case, not only at the point of lending, but well into the future.

Underwood says: “It sits at the riskier end of the market. A large part of that stems from valuation side – even small differences or errors can have a compounding impact on the actual residual value that you’re lending against.

“For example, the [gross development value (GDV)] is based on a current point of time, but actually these units might not get built for between two and five years. You need to consider what those units will look like, and what demand might be, five years from now.”

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This is all the more problematic in market conditions such as the ones seen over the past year, where vast changes to demand and consumer preferences have made what might have been a sturdy investment two years ago into a far less profitable option without much warning. For example, the move away from city centres and the wish for more space post-lockdown has shifted demand away from built up areas and apartment blocks.

This trend may revert given enough time post-COVID, but that again simply demonstrates a lack of certainty.

Underwood adds that construction costs are also prone to fluctuations, sometimes in unforeseeable and highly damaging ways. This has been seen during the pandemic, with rising costs of materials and labour shortages causing wide fluctuations.

As a result of all the moving pieces at play, Numan Sultan, real estate senior associate at Howard Kennedy, says that pre-construction lending necessitates a considerable focus on the skill of the borrower.

He says: “You would expect the borrower to be quite sophisticated and already thinking about these things.”

Underwood agrees: “There is a lot more focus on the borrower, their experience, and their ability to deliver.”

With the borrower taking a central role, and with such a high chance of unforeseen changes, it is understandable that many lenders will expect evidence of previous experience before they are comfortable providing pre-construction lending.

Sultan adds: “It’s just a bit more due diligence on the legal side, treating this essentially as development finance, because you need to look to the future. Things might fluctuate, and we need to mitigate risk one, two years down the line.” www.sfintroducer.com

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CONSTRUCTION A particular challenge, as highlighted by Scott Marshall, managing director of Roma Finance, is that prior to construction starting, it is near impossible to know about key issues that might delay a project, or derail it entirely.

Marshall says: “What you often don’t know is what’s underneath the ground, which can materially impact build costs, development costs, or even make a site unviable. So it’s hugely risky, much more so than when you’re lending for the construction, where someone has a flavour at least of what’s underneath.”

Phil Mabb, property finance broker at Bridge Development, agrees: “It’s a grown-up product compared to anything else, so you’ve got to back the right people – it isn’t just about the asset. It’s not for the faint hearted, it’s a limited product, but it’s good for backing the right people.”

SOLVING PROBLEMS As the market emerges from the pandemic, the panel urges brokers – especially those new to this part of the industry – to take a closer look at how development lenders responded to the challenges of the past year, both in terms of how they tackled the problems they faced, and how they treated their customers.

Justin Trowse, director – bridging at LendInvest, notes that development and construction is an area that was, and is still, heavily affected by the pandemic.

He says: “We’ve seen quite a few delays across the board due to the various lockdowns, from labour shortages to materials, prohibitive restrictions around working on site, limited access, and then simple things like sales and marketing suites.”

Government interventions have, in some cases, helped to combat the impact of these delays and disruptions, for those eligible to access the funds.

“We were fortunate enough to have a good relationship with the British Business Bank, and we secured a tranche of [Coronavirus Business Interruption Loans Scheme (CBILS)] money,” Trowse explains.

“That short-term capital at a very low cost – if you were eligible – was really useful for developers to smooth out their situation, so a lot got the necessary breathing space to continue. If they hadn’t had that space, some would have failed, whereas now some are performing really well.”

“What I’d like to see, if there is a PD boom, is creating quality stock. There needs to be more thought in terms of planning, layout, amenities, and ESG” JUSTIN TROWSE

www.sfintroducer.com

“There are some lenders that do air space development, but most lenders are resistant because it’s an unknown at the moment – but it will become more prevalent in the future” NUMAN SULTAN However, Marshall raises concerns about how some lenders took advantage of opportunities in a way that disadvantaged clients.

He says: “We saw a huge amount of profiteering, where a customer was disadvantaged through no fault of their own, and some saw that as an opportunity to make more money from customers who could do nothing about it. Borrowers have declined to name and shame, because they worry about the impact on their future ability to borrow money.

“It all comes back to how the specialist lending industry – depending who you talk to – is either transparent or not transparent.

“I know this largely is not a regulated market, but actually behaving like a regulated lender is something to do to push up standards. How a lender behaves towards a customer when something goes wrong is more important than the headline rate.”

Marc Callaghan, national sales manager at Shawbrook Bank, agrees: “We’ve spent the last five to 10 years trying to work on the industry and make it look cleaner, and there’s been some fantastic work to bring it to where it is. Over the last year, it was such a shame to see some people taking real advantage.

“Unfortunately, even though others remained really consistent throughout and tried to stay open as much as we could, the moment that some of those others come back, with the ability to probably push parameters much further than we should, the market jumps back towards them, because they do offer those extra pushes where the rest of us prefer to stay comfortable where we are and stick to consistency.”

This is particularly problematic in an area such as pre-construction lending, Callaghan adds, because of all the unpredictable risks that are already at play, even in seemingly straightforward deals. For this reason, consistency and steadfastness, rather than pushing for the most eye-catching rates, should be paramount.

Underwood adds: “When we look back at the past year there were lots of lenders dropping out because of lack of appetite or lack of funding, whereas we remained open the entire period, but just tweaked some products and risk levels to account for uncertainty.

“It would be great if people had longer memories about how others behaved in that period, but people bounce back to those lenders.” → JUNE 2021 BRIDGING INTRODUCER

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“There’s still a shortage of housing in the UK, but without an ability to finance sites with and without planning, we’re never going to get to a stage where we can build enough” DANIEL UNDERWOOD “I don’t think we can change this,” Callaghan continues. “I just think the sensible lenders across the market have to carry on doing the right thing and building the reputation.”

Considering who the best people to work with is an issue that comes up across the industry.

Emma Hall, key relationships director at Movin Legal, says: “It’s really important firstly to find a broker who has got experience. Whenever we have a recession, everybody jumps into what they think is going to make them a quick buck, so you need to find that broker that has the experience and the proven track record.

“From a legal perspective, it’s about making sure you find a legal team that is experienced in construction and development. It might be construction now, but you have to think of that client’s exit, for the sake of the client and the lender, you can’t just get the case off your desk. That way, you’re going to keep the client relationship going, not to mention the referral business.”

Callaghan agrees that this is a complex market that necessitates specialist expertise and experience.

He says: “Brokers have to know how to manage the client all the way through from start to finish. However, the broker market doesn’t have that knowledge as broadly as we’d like, and the difficulty all lenders will face is when you get that first broker who is trying to place a land deal, but they really don’t know the big pitfalls.

“The next worry is how experienced the client is, and whether they know the pitfalls. Has the broker taken them through every possible factor?”

Matters become even more complex when factoring a lack of planning into a pre-construction deal, which takes risk to the next level. Underwood explains that there are numerous pitfalls here; for example, planning might not be achieved, or the process might cause delays to the overall project. It is important, he adds, to have multiple contingency plans in place.

“The experience of the individuals involved is 100% key to success,” he continues. “That’s not just about them delivering on the development, but also knowing the planning process and what will be suitable.

“When you’re dealing with an experienced client on land without planning, they’ll usually have very good relationships, so they already know what the local authority is looking for and what kind of schemes it will support. It’s those kinds of borrowers you need to pick out if you’re going to lend into this sector.”

Marshall adds: “All lending, no matter who you are lending to, is about the individual. Lending has become almost commoditised, whereby some of the less experienced borrowers don’t understand that what they need is a lender they can build a relationship with, that can be with them on that journey.”

This is where the ability to be flexible, and if possible to provide multiple solutions, comes into play. For lenders such as Shawbrook Bank, Roma Finance and LendInvest, having multiple arms to the business, including development, bridging and term finance, and therefore the ability to move a case around and find alternative solutions, is key. This allows a lender to understand that if original plans go wrong, there are likely to be other exit options available in-house.

Trowse adds: “Having the capital is also really important – multiple funding lines and discretionary capital as well. We get a lot of cases where clients were promised the funds to develop out but can’t get their hands on the next drawdown, so certainty of funds is very important from a lending point of view.”

Marshall agrees that from a broker’s and customer’s point of view, knowing how the lender is funded and the products that it has in its arsenal is absolutely key.

TAKING ON THE FUTURE One trend that has been on minds across the property market is that of the future of the high street, as well as town and city centres in general, and the UK’s changing relationship with traditional working spaces.

For Hall, this is a trend that started well before the pandemic, which has been reflected in the shift for some development sites towards a more mixed approach, incorporating residential, commercial and co-working spaces, alongside social and dining hubs. This has now been exacerbated due to the mass experiences of lockdown and changing lifestyles.

Hall says: “It’s something that was already starting to happen in some areas of the country, and I think

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ROUND-TABLE

CONSTRUCTION the pandemic might push that through and make some towns look a bit different. It might push some of these developments through quicker, and maybe make it more attractive to some lenders, because it mixes the risk.”

Underwood adds: “Local authorities need to think differently around how town and city centres are used going forward, to align them with changes in people’s habits in terms of how they live, work and shop. Clearly the old designs are no longer working, so there needs to be some forward thinking and innovation.”

On the subject of innovation, Sultan raises the question of air space development, saying: “Some are trying to get air space development going to try and rejuvenate the high street and get residential on top of high street units. There are some lenders that do air space, but I find most lenders are resistant, because it’s an unknown to them at the moment – but it will become more prevalent in the future.”

While Shawbrook and LendInvest have both been involved in some air space development projects, this field brings with it even more complications.

Underwood says: “It’s always an interesting one lending against something that doesn’t actually exist, particularly in the secured lending space.

“But there are opportunities out there. It’s a complex area of the market that is not very well understood by a lot of lenders, and has its own challenges which need to be properly thought through, but the finance is there in the right places.”

Callaghan says this harks back to a previous point about relationships, experience and trust: “It normally comes down to working with a very experienced developer who has got a very good, proven track record, and has normally transacted with the bank before. It comes back to that trust, and their knowledge and experience is absolutely key.”

He adds that although there is indeed a sense of reluctance, as mentioned by Sultan, this may also just be a matter of time and exposure.

“As with anything, the more that it gets used and the more we talk about it, the more most lenders will understand it and look at whether it’s a market they can play in more,” Callaghan explains.

The current mismatch between supply and demand of housing in the UK may well necessitate creative solutions in the future. In general, this is where lenders with the capability to provide pre-construction lending may come in.

“There’s still a shortage of housing in the UK, but without an ability for people to finance sites and purchase sites with and without planning, we’re never going to get to a stage where we can build enough houses in the UK, even though it is the riskiest end of the market,” says Underwood.

Other avenues that the need to boost housing stock might lead down include commercial to residential conversions, particularly considering recent changes to permitted development (PD). However, Mabb points out that simply converting the properties does not mean that people will want to live there.

Trowse agrees: “With the relaxation of planning policy there will be more PD schemes. What I’d like to see though, if there is a PD boom, is creating quality stock. In the last PD boom, aesthetically we saw a lot of boxy offices with reflected light, in the middle of industrial estates. There needs to be more thought in terms of planning, layout, amenities, and also things like [environmental, social, and corporate governance (ESG)] and sustainable living.”

On this point about the importance of environmental concerns, Mabb suggests that lenders have some work to do in making it cheaper and more accessible for clients to build sustainably, in order to address the housing market’s impact on the increasingly pressing climate emergency.

Underwood says that these two points are part of the same picture, with affordable, sustainable homes being not only key to addressing housing supply and environmental issues, but also proving to be a robust area for investment from a lender’s perspective.

However, he agrees that unattractive and poorly laid out houses are not a viable part of this solution, in terms of both their sustainability and their sales appeal.

“Lenders also need to be mindful of the infrastructure,” says Hall. “It might be a fantastic area, but if you don’t →

“[Pre-construction] is a grownup product compared to anything else, so you’ve got to back the right people – it isn’t just about the asset. It’s not for the faint hearted” PHIL MABB

Experts at every stage www.sfintroducer.com

JUNE 2021 BRIDGING INTRODUCER

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CONSTRUCTION

“All lending is about the individual. Some of the less experienced borrowers don’t understand that what they need is a lender they can build a relationship with” SCOTT MARSHALL “

have schools, shops, or transport, that can affect the development. Infrastructure needs to be looked at as part of the whole image.”

SUSTAINABLE LENDING For Roma Finance, the question of moving towards a more sustainable housing market is high on the agenda.

Marshall says: “This is a very hot topic at the moment, and one we’re looking at very seriously.

We’ve funded the construction and development of the first commercially available carbon neutral properties in Scotland, with triple glazing, boreholes for water, windows that are south facing, air source heat pumps – the most incredible properties.”

One issue – particularly when it comes to modular, off-site construction – is that this is something of a new phenomenon, making it difficult to fully understand risk and pricing. Marshall points out that these properties were over-budget when built, but went on to sell vastly over-valuation.

Ideally, as these methods become more mainstream, predictions on timing, risk, budget, and the value of the final product itself will become easier.

The important thing, Marshall continues, is that market players consider their role in creating a more sustainable future. However, this is not as simple as just funding projects which seem green on the surface, as there are deeper considerations and complexities to be taken into consideration.

“We’ve all got a responsibility to think about the future of the planet,” he says. “We see lots of people looking to do developments outside of town with sustainable methods – but are you getting there by car? You might be using sustainable construction, but still have a massive carbon footprint.”

He adds: “Really it’s about how we repurpose existing buildings to reduce the carbon footprint of existing

properties, and how we make developments inside town and city centres more energy efficient in the way that they’re constructed.”

Underwood, who is a member of LendInvest’s internal ESG committee, says tackling environmental concerns takes a holistic approach: “The strategy is to drive not only things like green products, lending policies and business operations, but it’s also the actual company itself, looking at things like our own waste management, governance and the things we do as a business. People are becoming increasingly conscious of their impact. If nothing else, the last year or so has highlighted how important that is to people. That’s what the committee is all about.”

Marshall notes that one method of pushing the agenda, which is already being seen with things like Energy Performance Certificate (EPC) regulations, is to provide incentives – or indeed disincentives – around sustainability, and that this is something the government in particular needs to work on.

Callaghan considers whether this is something to be brought in at the point of planning permission, and whether local authorities should be insisting on each new home having, for example, electric vehicle charging points, ensuring properties are ready for the point where these are the norm, despite the additional cost implications.

Mabb suggests there is a reluctance among lenders to push towards moving into more innovative environmentally-friendly areas.

He says: “There are lenders out there who can do it, but just aren’t driven to. What’s driving people’s reluctance is probably more to do with what’s being delivered in terms of ordinary business, compared to trying to do something different.”

It is also the case, he adds, that moving towards more sustainable housing is complex, with no one-size-fits-all

“The difficulty all lenders face is where you get that first broker who is trying to place a land deal, but they really don’t know the big pitfalls” MARC CALLAGHAN

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BRIDGING INTRODUCER JUNE 2021

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ROUND-TABLE

CONSTRUCTION solution. For example, heat source pumps necessitate a certain size of garden, and do not therefore work for many properties.

Nevertheless, it is simply a matter of time, says Mabb: “There’s a few noises being made in the market about funding new methods. In good time it’ll be the norm.”

Callaghan adds: “The message is getting out to the market and to consumers, but there’s still a long way to go to continue to push that message, and it goes back to we can incentivise the developments, so that the greener they make their product the cheaper their margin is. That’s where all of us will be looking at some point.”

BALANCING THE TECH Whether the need to improve housing stock while maintaining a focus on attractiveness, longevity and sustainabilty, branching into lesser known areas such as modular construction and air space development, or just dealing with the unpredictable nature of a build, specialist lending is complex, with many moving parts.

Over recent years, and especially as a result of the push towards more tech-based processes as a necessity during the pandemic, the debate has risen about the role of automation and digitalisation.

One side is the need for vast technological improvement among other bodies involved in the construction, planning and development processes, for example the Land Registry, which Hall points out has been promised for some time, but has yet to materialise.

She explains: “Not all local authorities use the same computer system, so it’s not an easy one-fix issue. Lots of people are all on trains to the same destination travelling at different speeds, they’ll get there, just not all at the same time.”

Sultan points out that one aspect of the drive towards digitalisation is the ability to pull title information and automatically populate it into a report. However, this the information still needs a human to investigate, translate and explain for the client.

It is also not simply a case of hurtling forward towards change and innovation without thinking.

Hall adds: “I’m very much for tech, but I’m also very much for the people behind it. A quoting or sourcing system cannot answer all the questions, whereas a person at the end of the phone can talk through the deal and spot any hurdles.”

Underwood agrees that there is a careful balance to be struck between pushing forward with technological

innovation, and maintaining the important human touch within specialist lending.

“Specialist lending is complex and can be difficult, so you can’t get away from human interaction,” he says.

“You need individuals at every level, from brokers knowing what questions to ask and where to place deals, to lenders making decisions.

“I don’t think we will ever get to a point where you can automate the decision-making process in specialist

“I’m very much for tech, but I’m also for the people behind it. A quoting system cannot answer all the questions, whereas a person can talk through the deal and spot any hurdles” EMMA HALL lending because it’s just far too complex, and there will either be mistakes or you wouldn’t be supporting borrowers where you should be. But what we can do is use the tech to improve the speed and efficiency of those decisions.”

He points to things like system integrations and digital documentation, which can give a human underwriter everything they need to make an informed decision.

Marshall agrees: “Technology is used in a way to improve the method and speed with which data is presented to people making the decisions, but the decision-making process in the specialist market and for complex cases has got to be done by an experienced human being.”

However, he adds that there is somewhat more scope within bridging, and specifically with more vanilla cases, to use technology to allow the simplest to go straight through, while anything else gets checked by a person.

Trowse points out that a balanced and sensible focus on technology plays back into the the importance of a trusting relationship between client, broker and lender to make projects work.

Mabb agrees that in this market, “integrity counts for everything.”

Trowse concludes: “In bridging it’s not all about price, its more about reliability, being easy to deal with, surety of funding and delivery.” B I

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COVER

INTERVIEW

Lifecycle lending Jessica Bird and Justin Trowse, director – bridging at LendInvest, discuss the importance of a steady approach during turbulent times, the growing status of the bridging market, and the need for end-to-end solutions How did LendInvest fare during the events of 2020?

Truth be told, no one knew how it was going to go.

The pandemic could have been another ‘08 financial crisis, and half the industry might not have been in the market now.

Our approach was to not have a knee-jerk reaction, we just monitored the situation, saw how it was going, and continued lending, just with caution.

When it comes to bridging, specifically, we tapered our loan-to-values (LTVs) down to 70% on residential, for instance.

On commercial security, we were typically a bit more cautious of retail and other areas that were more likely to be impacted by the pandemic.

In terms of lending, we’re quite fortunate in that we’re probably the most diversely funded non-bank lender in the market.

So, if we were to have one institutional line pull the plug, we’d still have multiple other banking partners, our investment funds, and also listed bonds.

These different capital streams give us flexibility when it comes to lending, and we were still able to fund a number of big-ticket transactions during the pandemic.

As for the institutions and investment banks that we do deal with – mainly for residential bridging – we’ve got really strong relationships with them. We worked closely with them throughout the crisis and they were always aware of how we were adjusting to the situation.

From an operational perspective, being a FinTech in the first place really helped us. There’s no planning for a pandemic, but we landed on our feet because we were ahead of the curve.

We already had our internal loan management platform, customer relationship management systems (CRMs), the ability to perform online ID verification checks and e-signatures. We did come up against a few stumbling blocks, for example with solicitors and know your customer (KYC) checks, but I think it was a learning curve for everyone. In terms of quoting, we have online calculators.

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BRIDGING INTRODUCER JUNE 2021

That’s been one of the biggest successes for us in bridging and development finance, to be able to quote quickly and responsibly, and to be lending full stop.

The main lesson as a result of the events of the last year for us was that some elements of the business can still run efficiently while remote, but that other parts need a human touch still – I don’t think that will ever go away.

So, while there are some conversations around roboadvice and artificial intelligence (AI) for decision-making, for bridging that’s a long way off.

As a business, we are now going out to meet clients and developers on site again, that’s fully underway, and we’re bringing back the office workforce slowly.

We’re finding it’s working really well, especially with the operations and credit teams, to be able to have a group discussion around a table about a deal again, rather than scheduling a call. The plan is to go to a hybrid model.

Was it harder to be collaborative while remote during the pandemic?

We’ve done a lot of cross-team networking, and made every effort to try and do inclusive things across the teams as well.

We’re coming back to the office now, slowly, so teams will get more involved, because we’ve been speaking day in, day out for over a year, but haven’t seen the whites of each others eyes, which is a bit of a weird sensation. We’ve tried our best, but it was tough.

What do you think the key lessons of the past year were from a wider market perspective?

At the beginning, we didn’t expect the residential market to hold up that well, but the implementation of a lot of the fiscal stimulus from the government has been a great help.

The Coronavirus Business Interruption Loans Scheme (CBILS) has been invaluable, and the stamp duty cut was an obvious one as well. www.sfintroducer.com

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INTERVIEW In terms of the commercial market, I think we’re still seeing what the end results are going to be, and there’s going to need to be an adaptation in that area.

Towards the end of 2020 LendInvest introduced an end-to-end digital bridging application – what does this say about the role of tech within your proposition?

The first portal we launched was for buy-to-let (BTL), dealing with transactions at scale, and we wanted to bring that into bridging finance for a couple of reasons, beyond just the scale aspect.

Particularly around regulated bridging, the idea was to create automatic documents, and a place for brokers to store information so that if they’ve got repeat customers it’s already there and nothing gets lost.

The quoting system is also really important. For a broker, obtaining a quote that’s accurate and has a full set of terms quickly is really key, and can be the difference between winning a deal and not.

Providing that kind of service is a must in this day and age. We all bank online now, so why shouldn’t bridging lending be online?

As for the e-signature element, for a lot of this market the business practices everyone is used to are paper-based, whereas just having e-signatures makes it so much easier.

We are looking to launch the portal within the coming weeks, with the goal of bringing the entire bridging case management process online.

As a business, we have split out our underwriting and sales processes into small loans and large loans.

With smaller loans, typically they require less of a human touch than with a large complex transactions.

So we’re still offering routes for people to do both the paper form or face-to-face, or to go via the portal, because we realise there are complexities and no one deal fits in one box – no one deal is the same.

The pandemic has definitely sped things up in terms of our approach to technology, because we realised there was an immediate need to be remote and to be tech-based.

It sped up production on the portals and in other areas – for instance, we implemented open banking, and we implemented KYC portals as well to negate signed documents and filling in rafts of forms.

Prior to the pandemic, we had also put development on our loan engine.

We originally built our own loan engine so we can manage the portfolio of loans, so that when a client comes to us we know exactly where they are, their loan balance and how they’ve performed, and then that ties into some of the decision-making processes for the future as well.

Going back to the subject of winning a deal in the first place, especially in the short-term market, it’s really key to get out terms, or basically show you’re interested, so being able to quote off the online calculators very quickly is really good, rather than going through rafts of credit committees to land a set of terms, or present the client with a back of a cigarette packet representation.

You launched a structured finance arm in 2020 – how has this part of the business progressed?

Justin Trowse www.sfintroducer.com

It was twofold really, as I said we split our operations and sales processes into small and large loans, with different types of expertise in-house working on deals, mainly just to speed up the efficiency for everyone in the process.

Large transactions is something we’ve always done, but we haven’t really put a flagpost on it, and we haven’t shouted too much that we do large transactions, so we decided to form a structured finance team, based around having a large loans team.

They’ve done a really good job of establishing themselves, even during COVID-19, and to date they’ve had about £250m of enquiries.

They also contributed quite a bit towards shifting the CBILS loans as well. → JUNE 2021 BRIDGING INTRODUCER

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COVER

INTERVIEW What have been the key trends shaping bridging so far in 2021?

From a lending perspective, and in the market in general, there’s a lot of dry powder about, mainly led by the low rate environment.

There are a lot of new start-up lenders and offshoots of other lending businesses – there’s an insane amount of people in the market.

Competition is healthy, it’s good, but the market is becoming over-saturated with new entrants.

The residential scene in bridging continues to be a race to the bottom, especially with the cheaper funding that is available.

Those that will get burned are the ones that enter into pricing wars without doing their due diligence, just lending at those lower rates and higher LTVs. The ones that will perform well are those that have the deeper origination capabilities. So, originating larger loans, development finance, buy-to-let (BTL) finance, and again the structured property finance bit as well – it’s about having those bolt-ons, so you can retain those clients and intermediaries, rather than being a one-trick pony.

In terms of the market, there’s probably quite a lot of opportunities because there’s so many people in the market, and people are looking to build loan books. I think a lot of people will look to build their loan books artificially, so there will be plenty of opportunities for mergers and acquisitions.

I think, as is the nature of any market like this, some will go by the wayside and equally we’ll see some consolidation, mainly for the sake of loan book growth, and also to complement and diversify into different business areas they lend within.

What are some of the trends on the horizon for bridging?

The regulated bridging space will grow. There’s also the introduction of environmental, social and corporate governance (ESG) and green finance, that’s going to be a big area of the market, as a lot of investors are interested in that at the moment, and rightly so. It has started to filter into the BTL markets now, and it will filter eventually into bridging, so it is worth keeping an eye on that space.

Do you have a sense of how green finance, and ESG as a whole, is going to come into the market in the future?

We’ve got our own ESG committee at LendInvest, working on ways we can put it into products, not only on BTL, but bridging and development as well.

We can do ESG at three different levels: product, business or individual. We think about all of those things, and what we can do to make a difference.

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BRIDGING INTRODUCER JUNE 2021

Mainly it starts at the company level, to encourage individuals to think the right way, and create incentives.

We’ve got suggestion boxes on our internal online channels so that we can implement those ideas as well, and of course we’ve got the committee.

We look at any way of reducing our footprint as a business. For example, as a FinTech, that is partly about reducing the amount of paper we use, and the waste we produce, by bringing everything online on the portals – that does our bit for the footprint.

I think it’s quite simple, it’s just about being aware and conscious of how you’re running your business and the impact you’re having on the environment.

As for products, we ran an incentive for money off professional fees if the client boosted their Energy Performance Certificate (EPC) levels.

A lot of our business is bridge-to-let, so typically that’s something that’s in a poor state and can’t go straight to a BTL mortgage. Improving the quality of the product – such as through heat efficiency – and contributing to the overall EPC rating means that we reward the client with money off for the next deal.

Looking at modern methods of construction and modular construction, I think we’ll see this a lot more, but we are not quite there yet with lending for this becoming mainstream.

As a business, we’re going to try and understand it a bit better and see if we can create products and funding packages centred around that.

The credit teams and portfolio teams are going out to these modular factories and having tours around them, in order to understand how they’re implemented on a building site, which will also help us build products which can support that.

One of the issues previously was around not understanding how these elements played into construction, in terms of both the method and how it’s all funded. It’s about spending a bit more time and understanding it, and then we will be in a good position to implement it.

What trends are you seeing on the BTL side?

We’re seeing more demand than ever for private rental sector (PRS) schemes, and we’re seeing it throughout all the products, from the bridging and pre-construction stages, as well as seeing a lot of developers use Build to Rent schemes. We’ve funded quite a few recently up in the Northern cities and in South East London during the pandemic.

BTL is something that people are again looking at more because of the low rate environment. People are looking for high yield investments and to park up cash, so developers are now holding onto stock.

The funding market has got a lot better for the retention of stock. It’s cheaper to borrow money, so it’s one of those things that’s just snowballing in the right direction for the PRS and Build to Rent. www.sfintroducer.com

COVER

INTERVIEW Talk us through products like bridge-to-let – why is it important to offer multi-stage solutions?

We’re one of the few businesses in the market that has the expertise and flexibility of funding to work on these complex projects – for instance, a piece of land without planning – all the way through to development finance, and then to BTL, which allows us to share in the retention piece as well.

This means that clients can stay with one lender for more stages of the project, and also that intermediaries know we’ve got the expertise for multiple products in house, causing them less aggravation as well.

There’s less uncertainty around going to other lenders for each product. Each time they go to another lender, it’s another risk – new valuations, a new set of legals – so if that process can be joined up that’s great.

Something else we’re working on is product transitioning. We’ve got it, but if we can improve that process and do that seamlessly, again through technology and the portals, that will be a really compelling proposition.

If the bridging market is growing and becoming more mainstream, what are the key considerations for brokers entering it for the first time?

Bridging has become a lot more grown-up and a lot more professionalised. It’s no longer the cowboy market it used to be, the costs are a lot more palatable, and there’s a lot more products in the market as well. So, bridging is becoming more accepted and cost-effective.

I’d say to people that are entering into it, it’s not as daunting as you might think. If you partner with a good lender, you can always lean on that lender as well for help.

From a lender’s perspective, presentation is key. Ideally, brokers should provide not too much information, but enough clarity about the assets, the borrower, and the points of exit.

They should also think about what the borrower has done in the past, if they lack any experience and how they are compensating for that, and then any professional commentary the broker has got to go with that.

The exit strategy is important. Obviously logically, we are going to want to get them out of that loan and progress them onto the next stage, so the broker will gain a high level of praise for showing what the exit plan is now, what’s the base case and what’s the best case. Again, brokers can lean on the lender for the in-house expertise.

We’ve got a real mix of people here at LendInvest, both from a banking perspective in terms of the lending business, but also people from the property side – such as chartered in-house www.sfintroducer.com

Royal Institution of Chartered Surveyors (RICS) surveyors and quantity surveyors, who we can always chat to if we need expertise to either challenge something or help the client along.

Considering the influx of lenders into the market you mentioned, how can brokers tell a good lender from the crowd?

There’s a lot of new lenders that have good intentions, but when you’re a lender that has been in the market for some time, you get that reputation for reliability.

We’re one of the most diversely funded lenders in the market, and I actually start off broker presentations by reinforcing that. Over the years, whether through Brexit, coronavirus, or whatever else, a lot of lenders have pulled back because of appetite or funding.

Having a lot of different avenues to fall back on is key, knowing that you’re going to get funded.

In bridging finance, a lot of people say they want the cheapest rate, but it’s more about certainty of funding and deliverability.

What big developments are on the cards for LendInvest this year?

We’re going to launch the bridging portal, rolled out to our strategic partners first and then on a wider basis hopefully at the end of the month.

Off the back of that, we’re going to relaunch our regulated bridging, and then there’s a couple of other developments that we’ve got in play that aren’t solidified yet, but we’re always looking at ways we can innovate on the product side as well.

We are really concentrating on what we do best.

Most of our business comes from pre-construction lending and development exit finance, and commercial lending as well – then what we look to do is expand the residential business and the regulated offering as well.

We are just doing what we do best and continuing to grow.

What message do you have for brokers about working with LendInvest?

LendInvest’s unique selling proposition is that we are one of those businesses that can take a deal from cradle to grave. You can come to us with speculative projects, and we can take it from there, build it and retain it. There’s very few bridging lenders that can do the whole lifecycle, and do it well.

The other selling point is our certainty of funding.

As one of the largest non-bank lenders in the market, we’ve got a strong capital base that gives us unique flexibility when it comes to product development.

We have a range of funders from institutional capital to our investment platform that allows us to service a huge variety of borrowers and projects. B I JUNE 2021 BRIDGING INTRODUCER

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IN OUR OPINION

The past 12 months o Justin Trowse, director – bridging at LendInvest, discusses the experiences of the past year and the importance of being available, delivering deals and building for the future

O

ver the past month, our bridging range has undergone an exciting face lift – lower rates, higher loan-to-values (LTVs) and introducing brokers to our new online bridging portal have all been huge accomplishments for the team as it looks to continue leading from the front for 2021/22.

Following a record start to the year for completions, building on that momentum is crucial for us, but also for our clients, many of whom have been operating in a restricted way over the past 12 months and are now looking ahead to bigger deals, as we look to leave behind a challenging and uncertain period for property professionals.

We can’t fully appreciate where we are now, though, without looking back on our achievements over the past year, and how that has informed our future.

What does lending through the past year, responding to the market, and delivering for our clients amidst a pandemic require of a lender, and how can we build on that in the future?

RELIABILITY LendInvest has never looked to be the cheapest bridging lender, but has always been among the most well capitalised, and therefore most reliable, options for our brokers and borrowers when they need funds they can rely on.

This has been a key benefit for our customers over the past year, as we were always available to discuss and fund deals.

Our lending criteria remained in front of the market, and the willingness to work and structure deals with our customers remained. This helped us refine and improve our processes to suit the new environment we found ourselves working in.

Being a reliable lender has been crucial for our borrowers throughout the past 12 months.

After successfully negotiating a £50m facility with the British Business Bank to distribute the Coronavirus

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Business Interruption Loan Scheme (CBILS), we worked closely with property investors to help secure their projects against the challenges they were facing.

Large development exit and bridging deals were in high demand, and some examples of what we were able to step in to deliver are:  A £1.4m development exit in Berkshire for a repeat borrower who had sales slow down due to COVID-19;  A £1.6m refinance for a development finance loan where the completion and sales were delayed;  A £3.6m loan for a nine-unit scheme experiencing construction and materials delays.

These deals all needed to be delivered quickly to mitigate the short-term risks by providing a 12-month, cost-effective solution to the problem.

This experience came to embody where we were at as a bridging lender, but thoughts soon turned to where we could take the business next.

ADAPTING TO NEW CHALLENGES As a technology-enabled lender, we found the transition to remote working easier than most, with whole teams operating the day after we went remote, and adapting processes so we could continue to complete deals while remaining safely distanced from our customers.

We continued to build on this as the year progressed, adding in new automations to make bridging simpler, but not quite as simple as it could be.

We’ve had an online broker portal for buy-to-let (BTL) since we first launched into the BTL market, but no lender has attempted a similar service for bridging deals yet.

While the BTL portal was built to manage high volumes, we recognise that bridging often requires a more specialist approach, and have built that into our portal process.

There are several reasons behind the launch of this portal. First, it will make life simpler for brokers and their borrowers to be able to upload deals digitally, www.sfintroducer.com

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IN OUR OPINION

s of bridging rather than needing to submit paperwork, and should make repeat business a lot easier.

Second, it will speed up the processing time of our case managers and underwriters, who will be able to use the portal to manage all of their deals, cutting out any unnecessary chains of command.

This complements how we segment our bridging teams to allocate the right resource for each case depending on the necessary expertise.

Finally, record demand in the bridging market over Christmas and the New Year was driven by smaller, often more straightforward bridging deals.

This reflected the level of confidence present in the market, but we expect this to change over the next few months.

Indeed, we’re already seeing more development exit business, commercial deals and pre-construction loans for tapping into unseen value via planning gains.

Freeing up business development manager (BDM) and case manager time to work these deals with the attention they deserve will be of vital importance to all lenders as these deals grow in number.

So, being able to apply automation to the simpler deals, delivering them quicker and freeing up case manager, underwriter and BDM time is a great advantage the portal will be able to offer our clients.

The portal will offer a personalised account, meaning each broker will have a dedicated login to manage all their deals in one place, submitting enquiries, applications and track progress.

It will also allow for faster deals. Brokers can generate instant terms, manage outstanding requirements and have full visibility on what remains to be done on a case, while our team will spend less time on paperwork as a result of the improved integrations.

THE FINANCE TO MAKE EVERY DEAL WORK As I mentioned, we’ve never aspired to be the cheapest lender, but we have maintained the most diverse and deliverable offering in the market, as evidenced by our continued lending over the past year.

Whether it is more value with rate cuts across all of our products, or more leverage with higher LTVs on our land and commercial ranges, what is important is that as we look forward, we continue to deliver reliably. Whether it is a quick deal for £500,000 or a complex deal at £5m, we can back every type of deal for every type of client. B I www.sfintroducer.com

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REVIEW DATA

ASTL XXXXXXXXX

Rising demand NEW BRIDGING LOAN APPLICATIONS

25.5%

Increase in the value of new bridging loan applications in Q1 2021 (£7.49bn) compared with Q1 2020 (£5.96bn)

£27.3bn

Value of new bridging loan applications in the year to the end of Q1 2021, up 17.9% on the previous year and the highest figure to-date

ASTL analysis: The value of applications in the first quarter of 2021 was more than a quarter higher than the same period in 2020, which was mostly unaffected by the COVID-19 pandemic, reflecting the rising demand for short-term mortgage lending.

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www.sfintroducer.com

DATA

ASTL

The Association of Short Term Lenders’ (ASTL) most recent data set shows some dips in terms of loans written and loan book value in the last quarter, but overall growth in the market in recent years

BRIDGING COMPLETIONS Completions per quarter Q1 2021

£900,763,870

Q4 2020

£917,764 347

Q3 2020

£680,327,973

Q2 2020

£469,695,282

Q1 2020

£813,599,655

Q4 2019

£1,068,965,557

Q3 2019

£939,957,617

£1,088,859,553

Q2 2019

£1,087,076,672

Highest completion value recorded so far, in December 2018,

Q1 2019

£898,497,683

a 13.5% increase on the previous quarter alone

ASTL analysis: The value of bridging loan completions fell as a result of the first national lockdown but has since recovered, although completion levels are yet to hit some of the peaks of 2019, or the high of December 2018.

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REVIEW DATA

ASTL XXXXXXXXX

LOAN BOOKS

£4.4bn £4.62bn Value of bridging loan books at the end of Q1 2020

Highest loan book value recorded to date, in June 2019 ASTL analysis: The total value of bridging loan books is more than three times higher than the £1.36bn registered when the ASTL started recording the data in 2013, and has remained relatively consistent in recent months.

ANNUAL FIGURES

£25bn

Applications

Completions

Applications (Linear)

Completions (Linear)

£20bn

£15bn

£10bn

£5bn

£0 SEPT 2011

MARCH 2016

MARCH 2021

ASTL analysis: On average, it currently takes more than every £7 worth of bridging applications submitted to complete £1. This low conversion rate has been exacerbated by the pandemic, but it was an emerging trend way before COVID-19.

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www.sfintroducer.com

CELEBRAT1ON We’re immensely proud of how far we’ve come with our broker partners - a decade of achievements worth celebrating.

Here’s to the next 10 years!

Take the next step Development Exit, capital raises, planning plays; whatever your client needs for their next project get them flexible funding they can rely on.

Property finance made simple.

lendinvest.com LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). Your client’s property may be repossessed if they do not keep up repayments on their mortgage.

For intermediaries only.