Specialist Finance - Your guide to the market

SPECIALIST FINANCE Your introduction to the guide market Your

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Contents

4 Feature How are those in the specialist sector dealing with an unsettled 12 months? Jessica Nangle finds out more

Specialist market of endless possibilities The last 12 months have been an interesting time for the specialist market. Political uncertainty remains, however what we see now is a calm acceptance of the circumstances, and the specialist market continues to thrive.

Recent bridging data reveals that the total gross lending remains steady at ÂŁ185.32m whilst interest rates hit a record low. Completion times remain at around 40 days, and there are more discussions taking place as to how technology can help (and potentially hinder) the bridging market. Education is also at the forefront with educational programmes emerging in all sectors of specialist finance, helping to provide vital networking opportunities and industry know-how.

The demand is there and deals are being made – property investment continues to be the biggest reason for taking out a bridging loan, whilst interest in development and commercial finance is going strong.

In the buy-to-let market, the increased stamp duty is affecting second-time buyers, along with increased regulation for landlords.

However figures coming out of the industry remain strong, and the average yield for HMOs in 2018 was 8.9% according to latest figures.

This is an industry that thrives in any circumstance, but many agree that it takes caution and resilience to continue shining in this market. The specialist market continues to fill the gaps that the mainstream banks fear to tread, and offers more options to those who once had nowhere to go, both through product propositions and increased education.

The second instalment of this guide takes a quick glimpse into several areas of the specialist space, providing an overview on how industry leaders have viewed the last 12 months and how they plan to move forward.

This continues to be an industry of endless possibilities and, despite the cautious approach, the wheels continue to turn.

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10 Adam Tyler The value of using a trade association 11 James Hinch Strengthening the mechanisms for SMEs to resolve disputes 12 Interview Stephen Wasserman, managing director of West One Loans, discusses how West One are remaining cautiously optimistic in times of uncertainty 15 Bridging Finance 23 Buy-to-let 31 Commercial Finance 35 Development Finance 38 The opportunity for bridging West One discuss how intermediaries can support their clients with an increasingly accessible form of specialist finance

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ALL THINGS SPECIALIST The specialist market has had its successes but has also faced difficult moments in times of growing uncertainty.

How is the industry reacting to such a climate and are the right measures in place to overcome these challenges?

Jessica Nangle finds out more

T

he past 12 months have been an interesting time for the specialist market. Signs of growth have been seen across various data sets from the likes of Bridging Trends and UK Finance, however Brexit uncertainty is affecting the way consumers view and use the sector.

Many commentators say the specialist market can ride the tide, however others are concerned about the state of the market and how emerging trends will begin to affect the way the industry functions over the next 12 months.

Where are the areas for growth in these times of uncertainty, and how will the market fare? We spoke to key industry figures to find out their thoughts and what they see in the specialist market’s mystic ball.

Bridging Everyone has their own thoughts on the bridging market, whether it be about the level of education the sector provides or how saturated the market is becoming.

Recent figures by Bridging Trends showed the first quarter of 2019 to be a positive one, with bridging loan rates falling to their lowest level since 2015 and a rise in regulated bridging transactions for the first time in a year.

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Loan processing times saw a quarterly two day decrease to reach 40 days, and the average LTV dropped to 51.3%.

However total gross lending in the sector dropped by £16.3m from the last quarter of 2018 to £185.32m.

“The last year has seen the liquidity within the short-term lending market seemingly go through the roof,” says Chris Whitney, senior broker at Enness. “I hate to use the term ‘away with cash’ but I don’t think I have seen it any more liquid than we have over the last year, which I think we ought to be thankful for with Brexit overshadowing the wider economy.”

The bridging market has seen a number of new entrants into the market, creating new competition and, to some, a saturated sector.

“We have seen numerous new providers enter the market and reincarnations of older lenders in a different guise but with some familiar faces,” Whitney continues. “In theory it should also drive innovation as lenders fight for market share.

“However I think we have seen so much competition over the last year that there is now limited innovation as there is simply nowhere left to go.”

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“Recent figures by Bridging Trends showed the first quarter of 2019 to be a positive one, with bridging loan rates falling to their lowest level since 2015 and a rise in regulated bridging transactions for the first time in a year” To meet this increased competition some lenders have been creating more attractive rates and raising their LTVs which over the last 12 months has raised eyebrows.

“I think we have seen valuers being very cautious in this Brexit dominated economy, so in reality I think lenders at 80% LTV for example are covered,” Whitney adds.

This expanding marketplace allows more choice and could also be responsible for the low interest rates which have been reported in the latest statistics.

Along with increased competition, there have also been calls for increased education in this sector, with many industry leaders arguing that

more needs to be done to teach new entrants or even current players the ins and outs of the industry in the hope to increase consumer knowledge and provide better outcomes for customers with particularly complex cases.

Looking at other parts of the specialist sector, particularly in the development space, academies have been thriving by helping property developers network and gain key knowledge at no cost which has proved beneficial.

In addition, NACFB recently collaborated with LendInvest to create a short course specifically for property finance brokers which also proved to be a success.

Many feel that the same opportunities should be made available in the bridging sector to encourage collaboration in what is currently to many a fragmented marketplace. “What I am sure of is that the market has never been so fragmented, so the role of a specialist broker has never been more important,” Whitney concludes.

Development The development market continues to be buoyant despite the uncertainty of the marketplace, with more opportunities being found for development clients. 2018 was a positive year for the

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development finance market, and even the latest Bridging Trends reported that investment purchases was the most popular reason for borrowers taking out a bridging loan.

“The collaborative nature of bridging and development will become ever more prevalent in the coming months as hesitance continues to play a part in market sentiment,” Steve Larkin, director of development finance at LendInvest, says.

The collaboration between development and bridging finance has been what the lender has based their processes on, which they have found successful. Looking forward, Larkin argues that more is yet to come, particularly if the latest data

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is anything to go by.

“We can expect to see more developers seek to purchase sites,” Larkin adds. “Or apply for planning whilst they await crucial market announcements.”

Build to rent has also been a feature in this market over the last 12 months, and Phil Harris, director at BLP Insurance believes that the 34% year-on-year rise in completed homes during the first quarter of this year is proof.

“Six years since the government-led push to stimulate the build to rent sector through the private rented sector taskforce and against the backdrop of the UK’s housing shortage, build to rent

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is being increasingly recognised as an essential part of the provision of a strong housing market,” Harris says.

“The sector has been largely unaffected by the political quagmire our country is stuck in.” As the demand for rental property continues to rise, the model aims to allow property investors to achieve long-term investment returns, whilst also giving prospective renters the chance to have more choice across the market.

Property consultants Bidwells reported that demand continues to grow in this sector, with London First predicting that by 2025, just under 40% of all London households will be living in the private rented sector.

In addition, Bidwells explained that over 80% of build to rent investment has been concentrated in London and major cities where renters struggle with inflated property prices and lack of available property.

Bidwells noted that they are seeing expansion into the East and South East of England, so it could be a case of watch this space.

“Centred around a reliable business model, secure financing, and a willingness to push the envelope of innovation with its emphasis on offsite construction, build to rent is thriving across all regional urban hubs,” Harris concludes.

Development finance has seen changes over the last 12 months, with Chris Whitney at Enness explaining a rise in UK funders looking to finance projects in Europe.

“There used to be a saying that ‘good deals don’t cross borders’ but with a chronic lack of

“Despite a widely documented housing shortage, recent data reveals that there are more homes being built now than seen in a long time”

liquidity in the European banks and an almost non-existent specialist lending market that we enjoy in the UK I don’t believe that is true any longer,” Whitney explains.

Despite a widely documented housing shortage, recent data reveals that there are more homes being built now than seen in a long time.

“There is still a deficit of over 100,000 homes per annum based on the current rate of construction,” Whitney adds.

“However this has been reduced massively and I think this has had quite a lot to do with the availability of development finance in the UK.” The next 12 months are set to look bright in the development sector as innovative products and new trends emerge, and the market continues to accommodate schemes and developers across the country.

Buy-to-let Landlords have had a tricky 12 months, and times are not looking easier as the government recently announced an end to Section 21 which allowed landlords to repossess properties on grounds such as rent arrears and anti-social behaviour.

According to the latest figures by the Residential Landlords Association, almost half of landlords (46%) were likely to remove some or all of their investment in the private rented sector thanks to this decision.

Pair this with a constant high demand for rental properties, this can prove a challenging part of the market.

“More and more landlords are adding to their portfolios through a limited company in order to ensure they can secure the full tax relief on their mortgage payments which has been cut for properties held in an individual’s name,” Jeff Knight, sales and marketing director at Foundation Home Loans, says.

“There is no doubting that this has been the

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major growth area of buy-to-let when it comes to the purchase market.”

Similarly, activity has also risen within the remortgage area for this type of borrowing explains Knight, which has been viewed in recent data.

The ‘death of buy-to-let’ has been splashed across the mainstream newspapers, however many industry figures argue that claims such as these are exaggerated, and instead agree that this sector faces problems.

“We believe that the buy-to-let sector will continue to head in the direction of limited company lending,” Knight continues. “It is up to lenders to broaden their offerings and better support advisers in this area over the rest of 2019 and beyond.”

Recent statistics from RICS suggest that private rents are increasing by an average of 3% a year over the next five years which Knight argues is a result of landlords being less prepared to rent properties.

The housing market, despite making some progress, is still struggling as for many years demand has outweighed supply. “Whilst the UK is in the midst of a housing crisis and rental properties are becoming more unaffordable for many, the statistics from RICS do not make comfortable reading.

How do the issues facing the buy-to-let market be resolved?” This question is open-ended, and it will be interesting to see if the next 12 months provide a clearer answer.

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Commercial The commercial market has been affected by buy-to-let’s challenges for some time, however recent figures suggest that the market is remaining buoyant.

The latest UK Commercial Real Estate Lending Report from Cass Business School suggests that new lending for 2018 was a 12% year-on-year increase.

The report also mentions that CoStar Group, specialists in commercial property data, also recorded £54bn of property transactions over the same period.

Author of the Commercial Real Estate Lending Report Dr Nicole Lux suggested that 2019 needs to be carefully monitored in this sector; “Debt supply usually lags borrower demand by one year and 2017 was a strong year for property transactions,” she says. “It remains to be seen if the debt market was just catching up in 2018.

“Historically a relationship of 1:1 could easily lead to an overheating market and 2019 needs to be carefully monitored.”

The report showed that new development finance reached £8.8bn, with £5.2bn of that total being for residential development supplied by UK banks and other lenders.

Despite these totals being encouraging, this is a £1bn decline in new residential development finance than seen in 2017 with lenders reportedly suggesting that developments of private rental sector projects being ‘difficult to finance’.

Ion Fetcher, director of finance and commercial property at the British Property Federation, spoke after the release of the report from Cass about remaining optimistic.

“The overall picture appears to be one of stability in the commercial property lending market, with the amount of new lending and average lending terms in line with recent years.”

The commercial market, despite being affected by the challenges facing the buy-to-let space,

“The commercial market, despite being affected by the challenges facing the buy-to-let space, appear to be aligned with the overall specialist market by remaining calm and stable” appear to be aligned with the overall specialist market by remaining calm and stable.

It is not without its challenges, including the ‘demise’ of retail property which lenders and investors are having to contend with, however the uncertainty of the market hasn’t appeared to have affected the commercial sector as of yet, as business continues.

Upon the release of Cass’ report, Paul Coates, head of debt and structured finance at CBRE, also concluded: “The market in 2018 remained robust, despite continued political and economic uncertainty, with increased capital looking to deploy into the debt space,” Coates said.

“This in turn has created greater competition amongst lenders, with borrowers seeing more favourable terms across many asset classes.

“However, how long this lasts remains to be seen.”

In conclusion The specialist market has had an interesting year, as Brexit worries ebb away and, in its place, a calmer approach is maintained.

Each sector continues to have its problems whether it be an influx of new competition or increased regulation, industry leaders in each sector believe that change will come in the next 12 months, with the hope of a renewed focus and optimism.

Whatever the next year will bring many are prepared and the specialist market, known for its resilience, will keep on producing encouraging results. 

FUNDING NEW DEVELOPMENT WHETHER RESIDENTIAL OR MIXED-USE

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Comment

THE VALUE OF USING A TRADE ASSOCIATION A look at how a trade membership can benefit you

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good trade body’s primary role also need. The future of specialist finance is to look after the interest of its is a key focus for us. Via our work in assomembers by representing them ciation with government and other bodies, and their fellow members in the industry. we are working to improve access to fundIt is also important that representation can ing for SMEs and therefore reinforce the be made, when appropriate, to the Finanvital role played by professional finance cial Conduct Authority and any other releadvisers. Our fellow trade bodies, coverAdam Tyler executive vant government body or organisation, on ing other disciplines in the finance sector, chairman, issues that impact on the future operation will be doing exactly the same thing in FIBA of your particular sector. In our case for their particular fields. example, representing finance professionFIBA membership is enhanced by havals, we work very hard, in association with ing access to the kind of benefits package these other parties, to provide our members with that would be impossible to replicate by an ada powerful voice to help shape the development viser firm on its own, in terms of scope and cost.

Lender panel We now have a dedicated speof specialist finance and how it can be accessed cialist property finance panel and this is growing through the broker channel more readily. all the time. Some who can provide exclusive arIn addition, trade bodies provide access to rangements. the kind of support services that every modern Professional Partners’ Panel Our unique adviser needs to build their business. These inprofessional partners panel ensures that memclude training, guidance and assistance, access bers have access to legal firms who are proven to a comprehensive network of lenders, detailed specialists in providing legal support on comproduct knowledge, industry expert advice and mercial property transactions. Many law firms, dedicated compliance resources. while used to residential conveyancing, find that Intermediary inspired lending is one of the sucthey do not have the expertise to cope with comcess stories of the last 10 years. The expansion in mercial legal work. the number of lenders and the growing underProfessional Indemnity Cover We know standing by business owners of the importance how difficult it is to secure good value PI cover. of unbiased whole of market advice is the springOur new block policy scheme gives FIBA memboard from which advisers can flourish. With bers the cover they need at a competitive rate. borrowers increasingly looking for specialist fiOther benefits are too numerous to mention nance and advice on the funding opportunities here, but the value of a good trade body, in whatthat accompanies this, advisers are in demand ever discipline, lies in its ability to represent its more and more to provide the service that bormembers’ interests proactively and use the collecrowers really need. At the Financial Intermeditive numbers of its membership to provide access ary and Broker Association, our members give to products and services, which are not available to themselves plenty of opportunities to succeed, individuals and small firms working on their own. by having access to all of those services that they 10

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Comment

STRENGTHENING THE MECHANISMS FOR SME DISPUTES The FOS compensation limit is no cause for alarm

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pril saw the launch of the Financial bus. There have been concerns expressed Ombudsman Service’s (FOS) exby organisations in the commercial comtended reach embracing a cohort pliance arena, that there will be a knockof SMEs so it is timely to consider some of on impact on Professional Indemnity the opinions and reactions to this regulaInsurance with the possibility that pretory tightening. miums could increase, and insurers may Whilst FOS will be restricting their re- James Hinch leave the market with entrants deterred as mit to SMEs with an annual turnover bea consequence. compliance consultant, low £6.5m and fewer than 50 employees, Professional Indemnity Insurance is an NACFB or an annual balance sheet below £5m, the important component of our member’s Compliance UK Finance plan is to not only support this business and we work hard with our busiextension but provide support for a broadness partners, Towergate, to ensure that er agenda. This includes providing access to an the policies deliver the most appropriate cover appropriate ombudsman scheme for SMEs with and that the premiums are competitive. Feedback turnover of between £6.5m and £10m and a balfrom Towergate on this matter has confirmed ance sheet up to £7.5m demonstrating an industhat their insurers are aware of the FOS changes, try commitment to supporting the establishment but this will not have an impact in their rating of a suitable ombudsman scheme for larger SMEs unless of course they begin to see an adverse that meet the eligibility criteria. increase in the number and size of claims paid.

The industry believes that the natural home They are keeping a watchful eye for now. This is for the ADR mechanism for this cohort of busia far more pragmatic and commercial approach nesses is within the framework of the FOS. Howthan the somewhat alarmist declaration heard ever, the industry has agreed to support and fund from others in the industry. an interim voluntary ombudsman with an aim to As with any new initiative there are bound to deliver the arrangement by September 2019 and be learning points as the processes and systems will work with all stakeholders with input from are tested. I am sure that the independent assesgovernment and regulators to develop the necessor of FOS will be widening her remit as the exsary proposals as quickly as possible. tended reach becomes business as usual so there This new scheme will recommend appropriwill be transparency on how well the FOS are ate awards for redress, which will be binding performing. on banks up to a new higher level of £600,000, This initiative alone will not guarantee the meaning the bank cannot appeal any award up to highest levels of professionalism in every corner this threshold. As with the current FOS binding of the sector, but it will help. It will make a conaward, both parties can appeal over this threshtribution and ensure that all of us remember the old and the SME can still go to court if it wants to importance of professionalism and integrity in pursue an award above the threshold. everything that we do as we partner with SMEs Not everyone, however, appears to be on the on their customer journey.

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Interview

CONTINUED OPTIMISM Stephen Wasserman, managing director at West One Loans, discusses how they are remaining cautiously optimistic in times of uncertainty How have you found the last 12 months?

2018 and the first half of this year has been an important time for West One Loans.

Our lending businesses have performed well against the continuing political uncertainty and challenging economic conditions. Despite this we have seen record numbers of bridging transactions and significant growth in our second charge mortgage products. We’d like to think we’ve become a significant player in the specialist finance sector, and have consistently demonstrated our stability, competitiveness and commitment to the market, despite interest from new entrants, lenders leaving and increasingly competitive pricing across the market.

We also expanded our lending operations to include development finance. This was a natural next step for our business given our expertise in bridging, and the number of clients we have helped build properties. I’m really pleased to say that it has been well received by the market, and we are funding a number of developments across the country – from Farnham, to East London, to Liverpool.

What areas of the specialist finance market are you seeing growth in?

Like the market is seeing in general - and has been reported by the FLA - we’re seeing strong growth in second charge mortgages. At the time of writing, the FLA have reported record lending for March 2019, and a second £100m+ month in 12

six months. The March numbers are also a 25% increase on the prior year.

Our second charge lending business has performed strongly, and in the last 12 months we’ve reached several key milestones, such as our 1,000th loan (and we’ll have broken 2,000 by the time this goes to print) and we’ve broken our own record lending figures three times this year already.

The bridging market has also performed really well. The latest issue of our Bridging Index estimates that gross annualised bridging lending reached £5.5bn for Q1 2019, that the average loan size has increased, and that an increase in unregulated bridging has helped keep interest rates competitive. We introduced the Premier Loan Team at West One - consisting of our most experienced underwriters - to offer a bespoke, dedicated service for larger loans, and we’ve had a number of high value deals come through, which also helped us to lend a record amount in April.

You are close to launching a new BTL product. What will this product offer and what are your hopes for its performance?

Our range will include standard and specialist products, available to both individual and limited company borrowers. The specialist product range caters for HMOs, MUFBs, ex-pats, holiday lets and Airbnb properties. We’ll also be offering a fast track remortgage option to individual borrowers remortgaging up to a loan size of £750,000.

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It’s an exciting new chapter for West One. Whenever we enter a new market we aim to do it in a ‘meaningful’ way and not just make up the numbers, so we have high hopes that it will be a valuable and competitive product – with the usual West One common-sense approach to underwriting.

How do you view the secured loans market currently?

As previously discussed, we’re seeing record numbers for the second charge mortgage sector, and we’re confident there’s a space for our new first charge buy-to-let product, so we have a lot of confidence in the market. What’s interesting, though, is UK Finance data showing the impact of product transfers on the mortgage market. Almost 1.2 million people took a product transfer with their existing lender in 2018. Nearly half (47%) of product transfers were undertaken on an execution-only basis – meaning that any additional borrowing requirements will not have been discussed.

With these borrowers likely to be on a competitive rate, or now have an early redemption charge, a second charge mortgage may be the most appropriate way to raise additional funds.

This is part of the reason we’re expecting second charge mortgages to continue to grow in popularity.

Do you feel there should be more education within the specialist lending sector?

With the highest case count by month and by 12-month in second charge mortgages, and the ASTL recently reporting the highest ever bridging applications in Q1, these forms of specialist lending are clearly becoming more widely known and understood, which is a great. You could argue, however, that conversions have probably dropped. A number of our specialist introducers tell us that the cases they receive aren’t strong applications, so I think there is some work to do.

How is West One embracing technology within their processes?

Being part of the Enra Group gives us access to the in-house software development team and we’re really making great strides in this department. To support the launch of our new buyto-let product range, the team have created an

innovative broker portal for introducers.

The IT platform, which has been designed specifically to meet the needs of buy-to-let brokers, will be closely followed by the addition of a broker case hub - enabling intermediaries to benefit from streamlined processes and enhanced communication with West One’s dedicated underwriting team.

What are your predictions for the next 12 months in the market?

Trying to predict the future of the finance sector, in the year of Brexit, might just be madness! The general feeling is that Brexit will cause property prices to fall, which may impact the amount of equity people can borrow against, or affect exit strategies for bridging, for example.

But we are approaching the year with cautious optimism and careful, considered planning. The property market has been affected ever since the referendum, and thankfully that has not yet succeeded in restraining the buoyancy of bridging.

Buy-to-let has seen a huge increase in the number of products available over the last year, and although the headlines have been about landlords selling up because of changes to tax relief, etc – landlords with six or more properties are increasing, so specialist finance in the sector will only grow.

We still have a housing shortage, and our development finance product – launched a year ago – has been well received in the marketplace, too.

So all in all, cautious optimism.

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BRIDGING

BRIDGING FINANCE FINANCE BRIDGING FINANCE

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DEVELOPMENT SECOND CHARGE FINANCE MORTGAGES FINANCE MORTGAGES DEVELOPMENT SECOND CHARGE FINANCE MORTGAGES

BRIDGING SOLUTIONS BRIDGING SOLUTIONS WEST ONE IS A SPECIALIST SECOND CHARGES TO TO BUILD PROPERTY TO BUILD PROPERTY PROPERTY FINANCE EQUITY LENDER PORTFOLIOS SWIFTLY RELEASE PORTFOLIOS

Finance is one of the biggest challenges for small Finance is one of the biggest challenges for small property businesses. businesses.

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expansion.

With our sensible approach to underwriting, we’ll treat borrowers as individuals, even when they have more complex circumstances.

To find out more, visit our website at www.westoneloans.co.uk or give us a call.

0333 1234 556

0333 0333 1234 1234 556 556 www.westoneloans.co.uk

www.westoneloans.co.uk

WEST ONE IS A SPECIALIST WEST ONE FINANCE IS A SPECIALIST PROPERTY LENDER PROPERTY FINANCE LENDER

WEST ONE IS A SPECIALIST 020www.westoneloans.co.uk 8736 2297 West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information and Wales. Company Number: 05385677. West One Secured Loans Ltd is registered in England and Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England Wales. Company Number: 09425230. Registered Office Address for both companies: 3rd Floor, Premiere WestWales.

One Loan Ltd is Number: authorised and regulated by the Financial Conduct Authority. Firm Reference and Company 05385677.

West One Secured Loans Ltd is registered in England and Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial House, Elstree Way, Borehamwood, Hertfordshire. WD6 1JH. Conduct Authority.

Firm Reference Number: 776026.

Certain types loans are not regulated, example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Wales.

Company Number: 09425230.

Registered Office Address forof both companies: 3rd Floor,for Premiere Information Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England and Wales. Company Number: 05385677. West One Secured Loans Ltd is registered in House, Elstree Way, Borehamwood, Hertfordshire.

WD6 1JH. England and Wales. Company Number: 09425230. Registered Office Address for both companies: 3rd Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire. WD6 1JH.

www.westoneloans.co.uk

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information

PROPERTY FINANCE LENDER

Market Overview

BRIDGING FINANCE When looking for figures that represent the bridging market as a whole, it can be difficult to find analysis of the entire marketplace. A true estimate of the market, with constant new entrants and smaller lenders on the fringes of the market, is one that is almost impossible to identify. However there are a number of sources available that can be used, including ASTL and Bridging Trends data to look at a general overview of the market. Both sets of data reported strong growth, a low interest rate and decreased completion times. We look at some of the key figures below:

0.74%

Average monthly interest rate Q1 2019 (Source: Bridging Trends)

40 Days Average completion Q1 2019 (Source: Bridging Trends)

£898.5m Q1 2019 completions (Source: ASTL)

6.9%

Bridging loan applications up 6.9% year-on-year to £5.96bn (Q1 2019) (Source: ASTL) Guide to Specialist Finance – brought to you by Mortgage Introducer

15

BRIDGING FINANCE CRIB SHEET Excellent products

Outstanding service

Highly competitive residential investment and commercial bridging products.

Direct access to our decision makers.

The market’s first dedicated short lease bridging product.

Our underwriters see each case through from initial enquiry to completion and beyond for a seamless broker experience.

Properties accepted across England & Wales.

Our processing speed cannot be beaten.

Our terms are bespoke and transparent.

Commission 2% as standard.

PRODUCT

INTEREST RATE

LTV

MAX LOAN SIZE

MAX LOAN TERM

STANDARD CHARGES

Prime Residential Bridge

From 0.59% per month

Up to 60%

£5million

18 months

2% arrangement fee + valuation and legal fees at market rate

Classic Residential Bridge

From 0.65% per month

Up to 75%

£10million

18 months

2% arrangement fee + valuation and legal fees at market rate

Commercial Bridge

From 0.69% per month

Up to 75%

£10million

18 months

2% arrangement fee + valuation and legal fees at market rate

Short Lease From 0.99% Resi Bridge per month (10 - 70 years)

Up to 70%

£1.5million

12 months

2% arrangement fee + valuation and legal fees at market rate

All of our products and rates can be compared on our website funding-365.com Email your enquiry directly to our underwriters underwriting@funding-365.com Speak to a decision maker today on 0800 689 0650

Unregulated deals only. Products are subject to change. Visit www.funding-365.com for up-to-date guides.

Funding 365 Limited is registered in England & Wales. Company Registration Number: 08488034. Company Registered Address: 20 - 22 Wenlock Road, London N1 7GU.

Bridging Finance

THE VERSATILITY OF BRIDGING

B

ridging is a highly dynamic industry.

Competition keeps us lenders on our toes. Hardly a day goes by without a bridging lender announcing a new product, a reduced rate or an increased appetite.

This is obviously great for borrowers.

The many uses for bridging In last year’s Specialist Finance Introducer supplement I outlined the main use cases for the bridging loans on our book at that point in time:  Property acquisition  Property refurbishment  Development loan exit  Commercial loan exit  Business working capital  Debt forgiveness

repayment prior to practical completion.

I suspect that one of the reasons that this has changed is that the growth of development lending in the sector has required the introduction of large, institutional partners. Typically, large institutions are not prepared to fund portfolios Michael where a sizeable proportion of loans are Strange managing overdue. This results in significant presdirector, sure on development lenders.

Funding 365 Some bridging lenders (including Funding 365) are happy to step in to help these developers get their projects to practical completion, as well as provide sufficient time to exit the loan via property sale or refinancing.

We completed our first finish and exit loan back in 2017, but in 2019 the demand for them has really taken off.

All of these use cases are still on our bridging loan book now, but there’s an additional use which has grown significantly over the past 12 months. It’s being called the finish and exit loan and it’s like a development exit loan, but in a scenario where the build is not yet complete.

Whilst there are many reasons for delays on development projects, it seemed that several years ago development funders would have generally stuck with developers until their properties were built, rather than demanding

Finish and exit case studies a) The borrower required £6m to pay off their development loan, complete their build and then market their semi-commercial new build in South West London. Funding 365 provided a nine month finish and exit loan at 75% LTV. b) The borrower required £350,000 to finish and exit a project of four new build homes in Norfolk which were only 75% complete. Funding 365 delivered a 12 month finish and exit loan at an interest rate of 0.85% per month.

Speak directly to one of our award- winning underwriters for super fast, highly competitive, bespoke bridging terms.

0800 689 0650 underwriting@funding-365.com

U. Guide to Specialist Finance – brought to you by Mortgage Introducer

17

MFS delivers fast bridging loans for buy-to-let purchases & refurbishments: Free valuations Funds ready to deploy Broker incentives Zero admin feesfunding lines available and MFS have several inNo times of financial uncertainty when we charge for say yes,repayment we really mean yes! early FREE valuations on residential loans funding lines ContactSeveral our award-winning teamavailable on 020 7060 1234 to arrange a meeting with one of our Business Development Managers Friendly, personal service

MFS

Zero admin fees

®

No charge for early repayment andand intermediary incentives MFS areIn-built specialistsbroker in fast, flexible bespoke bridging loans for buy-to-let landlords.

Loans from to £10m • Arranged in days • Development Friendly, personal service Should you£100,000 wish to speak to one of our Business Managers Visit mfsuk.com/intermediaries to find more MFS and the incentives we please call us on 020 7060 1234 orout drop us aabout line at enquiries@mfsuk.com offer to new and existing brokers. +44(0)20 7060 1234

MFS - NACFB Advert March 2019 - With bleeds.indd 1

enquiries@mfsuk.com

www.mfsuk.com

08/01/2019 12:01

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Bridging Finance

BROKERS AND UNCERTAIN TIMES

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hen it comes to countries of deals – when we say yes, we mean yes. offering lucrative buy-to-let Recently, a broker we had previously investment opportunities, worked with returned to us on behalf of there are very few that can match the a client who required a bridging loan to diverse range of opportunities available complete the purchase of a buy-to-let inacross the UK. vestment in central London. Within less It is unsurprising, therefore, that dethan two weeks of receiving the referral, Paresh Raja mand for UK property remains high we successfully deployed a £3.4m bridging CEO, Market among both domestic and international loan at a LTV rate of 70%, with a traditionFinancial buyers. However, the lingering doubt real long-term refinance exit strategy.

Solutions garding Brexit is having an adverse impact The success of this case reaffirms the on lenders; anecdotally, it would appear more are confidence brokers have in referring their clients pulling out of deals or limiting their services. to us, and, moreover, our ability to act at a time So, where can brokers turn to find the best when some lenders are becoming hesitant. deals for clients?

Brokers beware Historically, specialist lenders have heeded The lending market has become increasingly the call of borrowers in need of fast capital. This competitive in recent years, and this is why some was demonstrated in the aftermath of the global bridging firms are attempting to lure in intermefinancial crisis, when banks restricted their lenddiaries with attractive rates that are simply not ing and new alternative lenders rose to promideliverable. There is no room for such behaviour, nence in their place. and thankfully the last few months have shown Yet now brokers must reassess the options, fajust which lenders remain committed to brokers, vouring specialist lenders who have the strength fostering long-term relationships founded on and stability to press ahead with deals even in mutual respect. this climate of uncertainty. Looking to firms with Looking to the future, MFS sees the coming experience and healthy funding lines is a good months as a time of opportunity. Having estabplace to start. And Market Financial Solutions lished ourselves as one of the UK’s leading bridg(MFS) meets both of these criteria. ing lenders, MFS understands the importance of MFS has continued to serve the needs of its creating and nurturing a broker network in an brokers by ensuring they have access to fast credit open, transparent manner. lines and in-house expertise. We do not pull out

020 7060 1234 | enquiries@mfsuk.com Berkeley Square House, Berkeley Square Mayfair, London W1J 6BD

When we say yes, we really mean yes!

www.mfsuk.com

Guide to Specialist Finance – brought to you by Mortgage Introducer

19

72 bridging loans funded on average each week in 2018*.

Piece of cake.

We’re the bridging loan experts.

Complex cases? We eat them for breakfast… and have done since 1985. Over the years we’ve seen it all – so you can trust us to make a quick, common-sense decision.

togethermoney.com/bridging Call the Broker team on 0808 115 4392 or speak to your BDM.

Rates from

0.49% per month^

For professional intermediary use only. *Includes unregulated and regulated bridging loan applications in 2018.

The rate offered will depend on product, security and the applicant’s individual circumstances.

^

Bridging Finance

SPEED AND FLEXIBILITY ARE KEY

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o industry is immune from the uncertainty facing the economy at this time, and that is certainly true of property. But the bridging loans market is proving resilient, the latest statistics from Bridging Trends suggest.

In the first quarter of 2019, overall bridging lending was up over £30m yearon-year, and average LTVs are still a very conservative 51.3%. With such demand from the market, competition among lenders is fierce, leading Bridging Trends to report the lowest-ever average monthly interest rate in Q1.

Issues that can put the brakes on a case with some lenders – such as imperfect credit, tight deadlines, and non-standard properties – are things we are able to consider. Our underwriters are empowered to think pragmatically and consider the application as a whole, rather than focussing Richard on strict criteria. We’ll look for a way to Tugwell group lend, so if we’re not able to approve the apintermediary plication immediately for any reason, we’ll relationship ask questions that could unlock the probdirector, lem. For example, specialist brokers First Together for Bridging approached us with a client who needed to borrow just over £1m to seize a development opportunity. Complicating the situation was the tight deadline – the loan needed to “We’ll look for a way to lend, so be funded in just five days – before the property’s if we’re not able to approve the notice to complete expired.

The broker brought the case to us because the application immediately for any clients, the directors of a development compareason, we’ll ask questions that ny, were struggling to raise the money through mainstream channels. could unlock the problem” After our initial review of the case, we delved deeper and found the clients’ company owned Of course, rates can only go so low. And as they another unencumbered residential property, become homogenised, speed and flexibility beworth nearly £700,000. We were able to raise a come the key traits that mean lenders stand apart charge against this property, as well as another on from the competition. Fortunately, we have been the £2.9m-valued development site. delivering a common-sense approach over more So due to our flexible approach we were able to than four decades that puts speed and flexibility provide the £1,010,000 unregulated bridging loan at the heart of what we do. the client needed ahead of the five-day deadline.

When you have a complex case, we’re here to help.

Email or call one of our experts on 0808 115 4392 Nicholas Jones, Head of Specialist Distribution nick.jones@togethermoney.com

General enquiries newbusinessteam@togethermoney.com Richard Tugwell, Group Intermediary

John Truswell, Head of National Accounts John.truswell@togethermoney.com

Relationship Director richard.tugwell@togethermoney.com

Robert Oliver, Head of Field Sales rob.oliver@togethermoney.com

Guide to Specialist Finance – brought to you by Mortgage Introducer

21

BRIDGING

BRIDGING FINANCE BRIDGING FINANCE FINANCE

DEVELOPMENT

SECOND CHARGE

DEVELOPMENT SECOND CHARGE FINANCE MORTGAGES DEVELOPMENT SECOND CHARGE FINANCE MORTGAGES FINANCE MORTGAGES

BRIDGING SOLUTIONS INTRODUCING OUR NEW SECOND TO TO BUILD CHARGES PROPERTY BUY-TO-LET RANGE EQUITY PORTFOLIOS SWIFTLY RELEASE Finance one of thevariety biggest We lendison a wide ofchallenges for small property businesses. property types - to a broad

A great solution for -aand client that range of borrowers have Whether your client is looking to resolve a broken needs to raise capital. the expertise to help landlords

property chain or is a property professional buying at mortgage or re-mortgage quickly. auction - their understanding circumstances can a challenge for High With a unique ofbe the Street lenders.

Key product features include:

market, we can offer both residential and Buy-to-Let second charge At One know that the flexibility and speed of a • West LTV up towe 80% mortgages.

This can help your Bridging loan can often solve problem.

• 2 and 5-year fixed term theclients raise from their home and • capital First time landlords To find out more, visit our website at landlords to release equity in their • Flexible approach to portfolio www.westoneloans.co.uk or give us a call. rentallandlords portfolio to fund business • Faster expansion. completions for standard re-mortgages

With our sensible approach to With our sensible approach to underwriting, we’ll treat borrowers underwriting, we’ll treat borrowers as as individuals, even when they have individuals, even when they have more complex more complexcircumstances. circumstances.

ToTo find out websiteatat find outmore, more,visit visit our our website www.westoneloans.co.uk or www.westoneloans.co.uk orgive giveusus a call. a call.

03338736 12342297 556 020 www.westoneloans.co.uk www.westoneloans.co.uk

WEST ONE IS A SPECIALIST WEST ONE IS A SPECIALIST PROPERTY FINANCE LENDER PROPERTY FINANCE LENDER

020 8736 2297

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: West One Secured Ltd is andConduct regulated by the Financial Conduct West One510024.

Loan Ltd is authorised and Loans regulated byauthorised the Financial Authority.

Firm Reference Authority.510024.

Firm Reference Number: Certain types of loans are not regulated, for example loans Number: West One Secured776026.

Loans Ltd is authorised and regulated by the Financial Conduct for business purposes or certain buy-to-lets.

West One Loan Ltd isare registered with thefor Information Authority.

Firm Reference Number: 776026. Certain types of loans not regulated, example loans Commissioners Office.orRegistration Number:West Z2651210.

WestLtd One Loan Ltd iswith registered in England for business purposes certain buy-to-lets.

One Loan is registered the Information and Wales. Company 05385677.

West One Secured LoansLoan Ltd is registered in England and and Commissioners Office.Number: Registration Number: Z2651210.

West One Ltd is registered in England Wales. Company Company Number: Number: 05385677.

09425230. West Registered Office Address forisboth companies: 3rd Floor, Wales.

One Secured Loans Ltd registered in England and Premiere Wales.

House, Elstree Way,09425230.

Borehamwood, Hertfordshire.

WD6 1JH. Company Number: Registered Office Address for both companies: 3rd Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire. WD6 1JH.

www.westoneloans.co.uk

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information

WEST ONE IS A SPECIALIST PROPERTY FINANCE LENDER

Market Overview

BUY-TO-LET Regulatory changes have affected the buy-to-let market in the last 12 months, which has seen landlords struggle to adapt. Despite this, there is optimism in this market with opportunities aplenty. We look at the state of the market below:

8.9%

HMOs average yield in Q1 2019 (Source: Mortgages for Business complex buy-to-let index)

2.91%

Average mortgage rates 5-year fixed (Source: Moneyfacts)

70%

Average LTV buy-to-let on purchase (Source: Mortgages for Business Buy to Let Mortgage Index)

ÂŁ189,843

Average loan size for a buy-to-let mortgage (Source: Mortgages for Business Buy to Let Mortgage Index) Guide to Specialist Finance – brought to you by Mortgage Introducer

23

Roma_MortIntrodAd_148x210mm_AW.pdf

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17/05/2018

14:15

Just 15 days to completion

Expert bridging finance for property projects

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commercial and semi-commercial properties.

At Roma Finance, we back property professionals to get the most out of their projects.

Our unrivaled experience, expertise and smooth processes give us the edge when a deal needs to be completed quickly – really quickly!

Our proven track record of speedy payouts and fast fundings have helped many borrowers acquire property, maximise planning gains and make money for themselves.

AIPS in 1 working hour Fast track payouts 1st & 2nd charges Limited packaging

If you’d like to work with a lender that delivers results, please get in touch with us today.

Loans from £30k to £1m All types of residential & commercial investment properties Property in almost any condition Finance for access or planning issues Loans for sole traders & self-employed

Call now for an immediate Agreement In Principle.

Underwriting decisions you can rely on Market-leading rates

0161 817 7480 . b r i dgi n ww

Helping Fund UK Business

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For introducer & professional property traders use only. Romaco Limited trading as: Roma Finance, 15 Carnarvon Street, Manchester, M3 1HJ. Registered in England 07232590

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03/06/2019 17:08:11

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Buy-to-let

THE CHALLENGES OF LEGISLATIVE CHANGE

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ollowing changes to regulations, believes that it would reduce or eliminate landlords are questioning the defispecific housing problems. In addition to nition for mandatory HMO licensthe above changes the room sizes of the ing. The new definition has removed the property must meet the below minimum previous three-storey requirement which sizes, although some councils are also apmeans that a property will fall within the plying larger minimum room sizes. mandatory licensing regime if it:  Single bedroom for a person under 10 Phil Riches 1. Is occupied by five or more persons; years old minimum size of 4.64sq mtrs sales and 2. Is occupied by persons living in two  Single bedroom for any person over 10 marketing director, or more separate households; and years old minimum size of 6.51sq mtrs Keystone 3. Meets:  Double bedroom for any people over Property a. The standard test; 10 years old minimum size of 10.22sq mtrs Finance b. The self-contained test but is not a Expertise, solutions and broad lending purpose-built flat situated in a block comprising criteria three or more self-contained flats; or Keystone has a team of external and internal c. The converted buildings test.

BDM’s who can discuss and investigate enquiries In addition, there are two further common prior to a full application. types of licensing: Keystones lending criteria includes lending to: Additional licensing  Trading limited companies, SPVs and LLPs A council can impose a license on any category of  Remortgages within 6 months of purchase HMO in its area which is not subject to manda No minimum income for experienced landtory licensing. The council can apply this requirelords ment if a significant percentage of these HMOs  HMOs - maximum of eight beds and miniare being managed inefficiently, causing probmum value of £75,000 lems for the occupants or members of the public.  Multi-units to a maximum of 10 flats Selective licensing  New build properties Local housing authorities have the power to in First-time landlords - minimum income of troduce selective licensing schemes in relation £25,000 required to privately rented housing that is not a house in  Lending to ex-pats in FATF and EEA multiple occupation (HMO) in an area. Selective  No maximum portfolio limits licensing is available only where the authority  Up to 80% LTV

Need to discuss a case?

Talk to your local business development manager

e

08:11

Broker Hotline: 0345 148 9086 Guide to Specialist Finance – brought to you by Mortgage Introducer

25

Need a straightforward approach to Limited Company cases?

Solution Found.

Generous rental calculations, no maximum age, and accepting recently incorporated companies are just a few of the things we do to make limited company buy to let cases more straightforward.

Call us today on 0344

770 8032

Š2019 Foundation Home Loans is a trading style of Paratus AMC Limited. Registered Office: No.5 Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA. Registered in England with Company No. 03489004. Paratus AMC Limited is authorised and regulated by the Financial Conduct Authority. Our registration number is 301128. Buy to let mortgages are not regulated by the Financial Conduct Authority. No limit on portfolio size, subject to maximum borrowing of £3 million with Foundation Home Loans. Calls may be monitored and recorded.

foundationforintermediaries.co.uk

For intermediaries only

Buy-to-let

TAX AND PORTFOLIO LANDLORDS

T

he landlord community is clearly with larger portfolios (20-plus properties) making good use of a range of prowere more likely to arrange the mortgage fessional services on offer. Although directly with the lender themselves – 36% given the recent changes to the BTL marcompared to 23% overall. ket – in terms of the tax situation and its When it comes to tax implications, impact on how landlords are adding to landlords need to be aware of the big their portfolios - it is perhaps surprising difference between setting up a limited Jeff Knight that more do not use the specialist services company to purchase another investment sales and marketing of a tax advisor. property and transferring existing properdirector, The latest landlord research from Founties into one. And it’s prudent to point out Foundation dation Home Loans revealed that just over that advice involving a client’s tax obligaHomeloans half (54%) of all landlords use the sertions is beyond the remit of a mortgage vices of a tax advisor, while 60% use a letting or adviser. management agent and 70% use a mortgage Intermediaries should only be focused on the adviser. advice process regarding the mortgages availThe research – undertaken by BVA BDRC able to clients, as a limited company or as an highlighted that whilst many landlords utilise individual depending upon whichever path they and value a raft of available professional services, take. opportunities remain for advisers to forge new This is especially relevant as more opportuniintroducer relationships, especially with tax adties around limited company borrowing are likely visors. to emerge, and intermediaries should be looking The research also suggested that portfolio to target this 30% of landlords who did not use landlords – those with four or more mortgaged a mortgage adviser for their last mortgage, parbuy-to-let properties – are much more likely to ticularly larger-scale portfolio landlords who are use a tax advisor. 62% were reported to seek promuch more likely to ‘do it themselves’ when it fessional tax advice, while only 40% of those with comes to their mortgage finance. less than four properties have such a relationship Given the benefits advisers can provide in this in place. area, we would recommend a concerted marketIn comparison, over two-thirds of all landing focus on portfolio landlords and the limited lords used a mortgage adviser to arrange their company buy-to-let mortgage options that are most recent buy-to-let mortgage, however those available to them.

Call us today on

0344 770 8032 To find our more or to submit a case visit

foundationforintermediaries.co.uk For intermediaries only

Guide to Specialist Finance – brought to you by Mortgage Introducer

27

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Buy-to-let

STEP AWAY FROM THE SOURCING SYSTEM

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very self-respecting mortgage broEvery time you get an enquiry or comker or adviser will have access to a plete a factfind, by all means make a first cut sourcing system and without a doubt based on your sourcing system, but start it will act as the first point of call after the to analyse those lenders which only come factfind to start the process of elimination up when you have exhausted the ‘cheapthat leads to a shortlist from which a final est’ options that invariably tend not to fit recommendation can be made. customers with non-standard criteria Paul Brett However, while I am the first to praise issues. managing director of the positive impact that sourcing systems  Research these lenders in detail, lookhave had on the market, in an increas- intermediaries, ing for their USPs and idiosyncrasies Landbay ingly non-vanilla environment, the value  Make use of sites such as Criteria Hub of the average sourcing engine reduces in direct and Knowledge Bank, which provide so much proportion to the complexity of the customer’s more forensic detail about product quirks circumstances.  Aggregate the lenders which appear the most often and accommodate the kind of customer isBrokers beware sues with which you have to deal and repeat the So, although we are now seeing new deeper criprocess monthly to keep it current teria-based sourcing systems becoming popular,  Look closely at the level of service you receive unless intermediaries use these in tandem with on each case. This is, in my view, a vital compotraditional sourcing systems, there will be a manent, which of course will never show up in any jor element missing in the search for a specialist sourcing system lending product.

However, as more products come to market The most successful advisers we deal with at and the growing number of people with issues to Landbay are those who have recognised the need do with income, length of residence, employment to rely more on their own research. history, past or existing poor credit or unusual In every case, moving past the sourcing sysproperty types, the importance of stepping away tem has led to better results, fewer cases rejected, from the sourcing system has become a must for increased DIPs, higher percentage of successful advisers seeking to avoid the disappointment of completions, an overall better service for their cases that turn out not to fit. customers and increased income.

Here is my solution.

What’s not to like?

Specialist Buy-to-Let loans from Landbay End to end online process

Direct line to underwriters

Guide to Specialist Finance – brought to you by Mortgage Introducer

Fast decisions

29

Targeted lead generation

Full UK coverage

Reason for finance

Loan size

Location

Acquire another business

£750,000 - £999,000

Bristol, UK

Exclusive to NACFB brokers

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helping you fund UK business Welcome to the NACFB’s targeted lead generation platform: findsmefinance UK businesses seeking finance can filter by loan size, type and location and are presented with a range of NACFB brokers Each NACFB broker has an updateable online listing and can monitor SME engagement through analytical data Register today:

findsmefinance.co.uk/join findSMEfinance is a trading style of the National Association of Commercial Finance Brokers Member Services Ltd which is authorised and regulated by the Financial Conduct Authority 734857. We are a broker, not a lender.

Market Overview

COMMERCIAL FINANCE Flexible office space, retail shopping centres and commercial properties continue to be addressed by lenders who are keen to include these new properties which do not fit the typical bank credit models. Specialist lenders in particular have been keen to involve themselves within this sector and offer propositions which are unique and offer new opportunities. Here are some of the key figures:

29%

New loan origination against outstanding loan books reached 29% of turnover in 2018 (Source: Cass CRE Lending Survey)

40%

of outstanding loans by value are at 60% LTV for new other lenders (Source: Cass CRE Lending Survey)

£46.6bn

of new loan originations completed by year-end 2018 (Source: Cass CRE Lending Survey)

£5.2bn

of new development finance was for residential development supplied by UK Banks and Other Lenders (Source: Cass CRE Lending Survey) Guide to Specialist Finance – brought to you by Mortgage Introducer

31

Commercial Finance

DON’T FORGET THE NEGATIVES

W

hen placing a commercial another could not be found, then the clilending case there are three ents would return to being the proprietors key things to focus on to help and run the hotel themselves. ensure you can place the case successfully Some lenders would still not consider and that the client continues to use you. the refinance simply because the remainFirstly, it is not only about understanding lease length was too short, however ing the finances, but the client and their because of how the case was presented to Kevin background too, being able to take a wider the lenders we were able to obtain a longThomson look at the case, the client and their expeterm interest-only mortgage and an altersales director, rience. native 2-year deal with a different lender.

Connect for Secondly, it’s thinking like a lender: The client opted for the 2-year deal as it Intermediaries what will a lender be looking for? A browas 2% cheaper and would enable him to ker needs to solve any issues before placremortgage onto possibly more favourable ing a case to increase the likelihood of it getting terms once the lease had been renegotiated. through.

The lessons from this case is to really underFinally, it is about offering the client a choice stand the clients as much as the deal itself, as this of solutions so they feel part of the process. If you enables the case to be presented in the best posfind just one option for them, they may feel ‘told’ sible manner. and go to another broker to explore other opConsider all the negative aspects and mitigate tions. By providing different solutions they feel a them at the outset, effectively helping the lenders part of the process. say ‘yes’.

Connect had a case that highlighted these points recently. We were approached by a broker with a client looking to refinance a hotel, to raise enough monies to buy an investment property.

There were some challenges as the hotel was let to a tenant on a seven-year lease with only 2.5 years left. The strength of the case was that investment income from the hotel was strong and would more than support the refinance amount requested with the LTV projected to be below 60%.

The length remaining on the lease was the main issue and other brokers had failed to get the case placed because of this. Detailed conversations with the client revealed they were reluctant to pursue extending the lease as they would be in a weaker negotiating position now than in two-years’ time. However, these conversations revealed the clients had actually run the hotel successfully for 10 years before letting it out.

Connect approached a number of lenders with the proposition, mitigating the short lease with the guarantee that if the tenant did not renew and 32

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Commercial Finance

QUICK GUIDE TO COMMERCIAL

M

ortgages on commercial property The maximum loan amount is norprovide brokers with an excellent mally 80%, but in some circumstances opportunity to diversify their busiup to 100% may be possible. Interest ness and specialist distributors give brokers rates start from around 2% over the base the access expertise and experience in the rate and lender fees from 1%. Repaysector. ment loans are typically over 20 years, If you are looking to develop a new dibut interest-only facilities can be arHisham rection for your business in commercial ranged.

Elabaire finance, you can choose to either work toThe funds can be borrowed in percommercial finance gether with a specialist distributor or refer sonal names, limited company, pension specialist, cases in return for a share of the income. fund or trust.

Brightstar So, what basics do you need to know to get Financial Mortgages for commercial started? property investors Lending on commercial property can inCommercial investment mortgages clude businesses looking to purchase or reficover commercial or mixed-use properties that nance their own premises; investment mortgages are being purchased for rental return and capital to fund the purchase or refinancing of property gain and lending can be against any type of that will be let to businesses for rental return and commercial property, including offices, shops, industrial units etc. “Lenders are becoming more With the right property, investors in commercial property can earn a good yield on a full flexible on the types of lease repairing lease, with tenants generally tied in for they will allow on commercial longer periods than a standard AST, so they can properties� have real stability.

The strength of a lease is an important consideration when it comes to a commercial capital gain; and on some occasions a commerproperty mortgage, but lenders are becoming cial mortgage can be used to fund a particularly more flexible on the types of lease they will allow complex transaction on residential investment on commercial properties. property, such as apartment blocks of flats above Traditionally, high street lenders would want a commercial premises.

5-year lease on a commercial property, with no The types of property covered can include break clause, but the challenger banks reduced anything from retail units, industrial units and this requirement to two years and some lenders offices, through to public houses, petrol stations will now allow a rolling lease, which can make the and caravan parks. property more attractive to potential tenants.

Commercial lending for owner Understanding what is required on leases occupied/trading businesses and which lenders will consider different types Commercial mortgages for owner occupied propof lease is one of the most complex elements of erty are aimed at trading businesses that want to commercial property lending, but working with purchase or refinance their own premises. a specialist distribution partner can give you They can cover a variety of property types such the expertise you need to find the right solution as retail units, offices, factory units or any comfor your clients and diversify your business into mercial premises used by the business. commercial property finance.

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33

BRIDGING

BRIDGING FINANCE FINANCE BRIDGING FINANCE

DEVELOPMENT

SECOND CHARGE

DEVELOPMENT SECOND CHARGE FINANCE MORTGAGES FINANCE MORTGAGES DEVELOPMENT SECOND CHARGE FINANCE MORTGAGES

BRIDGING SOLUTIONS WEST ONE IS AASPECIALIST FUNDING NEW WEST ONE IS SPECIALIST SECOND CHARGES TO TO BUILD PROPERTY PROPERTY FINANCE RESIDENTIAL OR LENDER PROPERTY FINANCE LENDER PORTFOLIOS SWIFTLY RELEASE EQUITY MIXED-USE DEVELOPMENT Finance is one of the biggest challenges for small property businesses.

AFinance great solution a client that for small for & medium-sized Whether your client is looking to resolve a broken needs to raise capital. developers.

property chain or is a property professional buying at auction - their circumstances can a challenge for High When your client requires finance for With a unique understanding ofbe the Street lenders. new build developments or major

CHARGE market, we can offer both residential BRIDGING DEVELOPMENT SECOND CHARGE BRIDGING DEVELOPMENT SECOND renovations and conversions, getting and Buy-to-Let charge At FINANCE West One wesecond know that the flexibility and speed of a MORTGAGES FINANCE finance agreed is often a challenge. FINANCE MORTGAGES FINANCE mortgages.

This help your Bridging loan cancan often solve theclients problem. raise capital their home is and At West Onefrom our underwriting To find out more, visit our website at renownedtoforrelease considering each case landlords equity in their www.westoneloans.co.uk or give us a call. on itsportfolio own merits and we can cater rental to- fund business for developers looking for funding expansion. between £1m to £7.5m.

With our sensible approach to To find out more, visit our website at underwriting, we’ll treat borrowers www.westoneloans.co.uk or give us asa individuals, even when they have call. more complex circumstances.

To find out more, visit our website at www.westoneloans.co.uk or give us a call.

0333 1234 556 0333 1234 556 www.westoneloans.co.uk 0333 1234 1234 556 556 0333 www.westoneloans.co.uk

WEST ONE IS A SPECIALIST WEST ONE FINANCE IS A SPECIALIST PROPERTY LENDER PROPERTY FINANCE LENDER

www.westoneloans.co.uk

WEST ONE IS A SPECIALIST 020www.westoneloans.co.uk 8736 2297

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England West One Development Finance Ltd is registered in England and Wales.

West One LtdCompany is authorised and regulated theOne Financial Conduct Firm Reference Number: and Loan Wales.

Number: 05385677.by West Secured LoansAuthority.

Ltd is registered in England and 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Company Number: 11242570.

Conduct Authority.

FirmLtd Reference Number: 776026.

Certain of loans are not regulated, forFloor, example loans for business purposes certainLoans buy-to-lets.

West One Loan Ltd is registered with the Wales.

Company Number: 09425230.

Office Address for both companies: 3rd Premiere West One Loan is authorised andRegistered regulated by thetypes Financial Conduct Authority.

Firm Reference Number: 510024. West One or Secured Ltd is authorised and regulated by the Financial Registered Office Address: Information Commissioners Office.

Registration Number: Z2651210.

West One Loan Ltd is regulated, registered for in England Wales.

Company Number: West OneWest Secured in the House, Elstree Way, Firm Borehamwood, Hertfordshire.

WD6 1JH. types Conduct Authority.

Reference Number: 776026.

Certain of loans are not exampleand loans for business purposes or05385677. certain buy-to-lets.

OneLoans Loan Ltd is registered with 3rd Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire, WD6 1JH. England and Wales.Commissioners Company Number: 09425230.

Registered Office Address for One both Loan companies: 3rd Floor, in Premiere Elstree Way, Borehamwood, Hertfordshire.

WD6 1JH. Loans Ltd is registered in Information Office.

Registration Number: Z2651210.

West Ltd is registered EnglandHouse, and Wales.

Company Number: 05385677.

West One Secured England and Wales. Company Number: 09425230. Registered Office Address for both companies: 3rd Floor, Premiere House, Elstree Way, Borehamwood, Hertfordshire. WD6 1JH.

www.westoneloans.co.uk

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information

PROPERTY FINANCE LENDER

E

Market Overview

DEVELOPMENT FINANCE The development finance market continues to remain a prosperous sector with lenders continuing to show interest in the sector. With the UK experiencing a continuing housing shortage, the need for smaller builders has never been clearer. As an expanding market we look at some of the key statistics below:

ÂŁ8.8bn Total development funding supplied by all lenders during 2018

(Source: UK Commercial Real Estate Lending Report, Cass Business School)

5 years

The amount of time the government is set to miss its 2020 housing target by (Source: National Audit Office)

13,500

new homes were registered to be built in the UK (Source: National House Building Council)

13%

Construction completions were up 13% in Q3 2018 from the start of the year (Source: Savills) Guide to Specialist Finance – brought to you by Mortgage Introducer

35

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30/05/2019 16:32

Development Finance

TRANSPARENCY IS KEY

I

sometimes find it a bit of a cliché when joined the industry in 2012. It is though, lenders chant the mantra of ‘the devil essential that we continue to improve our being in the detail’. This is of course standards, which includes being completecompletely true when it comes to underly honest, open and transparent about the writing a new loan, but this is also easier way we charge our customers. said than done. Is there something us as At Magnet Capital we thrive on repeat lenders can be doing to help a property de- Ashley Ilsen business, with both our broker partners veloper client be as profitable as possible? and developer clients. chief When we first look at a new develop- executive and One of the reasons this is the case is beco-founder, ment finance proposal, one thing that’s for cause by being transparent on day one, our Magnet Capital certain is that the costs we are presented clients can pinpoint as accurately as poswith on day one are unlikely to be completely acsible where their profit will sit come the end of curate. their project.

Some expenses will be missed, delays will hapFewer nasty surprises for a client at the end of pen and ultimately a developer’s costs at the end a facility term means a much more likely chance of the project will often be some way away from of developing a genuine and successful long-term the initial appraisal received. With the full effects relationship. Trying to predict where the market of Brexit on building costs not fully known at this will be in 12 months, along with fluctuating costs, point, it’s more important than ever for developis making property developer’s jobs harder than ers to make sure that their costs are as accurate ever, and it is therefore our role as lenders to help as they can be. them as much as we can.

One area I find that is often overlooked is the cost of development finance, and I believe that lenders should be doing more to be completely transparent about what the cost of funding will be to a developer client from day one, and what this means for their bottom line.

This includes being completely clear about hidden costs, such as extension fees, admin charges or any other unfortunate ‘extras’ that I’ve seen pop up in some loan agreements.

The beauty of development finance is that there is more than one way to skin a cat. Every lender approaches development funding differently and more choice can only be a good thing for our market.

I do, however, find it slightly disconcerting when a client chooses to go with another lender on the basis that their offering is ‘cheaper’ despite the lender not being fully open about other charges that may not initially be declared. Sadly, it happens all too often.

Our industry has come a long way over the last decade. Reputationally we are wonderfully positioned compared to where we were when I Guide to Specialist Finance – brought to you by Mortgage Introducer

16:32

37

Advertorial

THE OPPORTUNITY FOR BRIDGING Stephen Wasserman, managing director of West One, discusses how intermediaries can support clients with an increasingly accessible form of specialist finance The recent edition of our industry tracker – the West One Bridging Index – showed that gross annual bridging lending reached £5.5bn at the end of the first quarter of 2019. While this is a slight decrease on Q4 2018, our report also showed that the quarter saw the highest average loan sizes since Q1 2017.

The Association of Short Term Lenders (ASTL) reported that bridging applications totalled a record breaking £5.96bn in Q1, too.

This follows a strong end to 2018 that yielded a new high of £5.7bn gross lending during the year.

Bridging finance, then, is becoming increasingly more mainstream. But it’s the ‘specialist’ qualities that make it so attractive – particularly its flexibility and bespoke underwriting. This has led to some rather creative cases.

I’m certain you’ll have clients who face similar situations – perhaps bridging finance could be the creative solution to their problems?

Client wishing to purchase a Grade II listed auction property The first of our “unmortgageable” cases… our client was keen to purchase a Grade II listed farmhouse through an auction. This set of circumstances makes this particularly difficult to secure traditional lending.

The age of listed buildings means that they are often classed as homes of non-standard construction, so securing a mortgage is not always straightforward.

Auction houses often require full payment within 28 days of the gavel going down, and first charge mortgages are unlikely to complete in that timeframe.

Lastly, the property had neither a kitchen nor bathroom, making the building uninhabitable, 38

again ruling out the majority of first charges from high street lenders.

In this scenario, bridging finance was chosen as the ideal solution; the speed in processing the application compared to a first charge mortgage made it a lot easier for the client to settle the full amount with the auction house within 28 days.

It also offered the client the funding needed to undertake the refurbishments before securing a traditional mortgage, and it created the opportunity to purchase the property that might not have existed otherwise.

The specifics:

Loan amount: £280,000 Property value: £475,000 Term: 12 months Product type: First charge bridging loan Exit: First charge mortgage

Client purchasing a property with Japanese knotweed Two horticultural words that make most lenders shudder: Japanese knotweed. This pernicious plant (Fallopia japonica) can grow at a rate of one foot a week in the summer months. Its extensive root system penetrates deep into the ground, and can damage building foundations, drainage systems and walls.

Little wonder many lenders recoil when they see those two words on a surveyor’s report. Most will insist on professional assistance in getting it removed (with an insurance backed guarantee against its return) – costing £3,000 or more.

Many lenders will decline the mortgage, withhold an offer until the work is done or insist that funds to do the work be held in a separate account.

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Advertorial

t to you by:

MORTGAGE

In association with:

This can be prohibitive to many borrowers, which is where bridging can come in.

We helped one client purchase a property, get the work done to remove the knotweed and get the certificate guaranteeing the work - before refinancing onto a regular mortgage.

NTRODUCER The specifics:

WEST ONE IS A SPECIALIST Client with plans to build andLENDER split titles PROPERTY FINANCE Creating opportunities for borrowers has been

Loan amount: £426,000 Property value: £1.9m Term: 12 months Product type: First charge bridging loan Exit: First charge mortgage

Client wanting to gift a common theme through these examples – and a deposit to their son this next case is no exception. Our client wanted Home ownership among the younger generation to purchase a house and the land it was on. His has plummeted over the years, and many young business plan was to build an additional property people are only able to meet affordability through on the land and split the title, with the sale of the gifted deposits from their family. second property as their exit route.

In one case we lent on, the client (the parents) Many first charge lenders consider the splitting and their broker came up with a particularly creof titles problematic - as it is effectively decreasative solution to help their son get on the proping the value of the existing property – so securerty ladder. ing a mortgage isn’t straightforward.

The applicant wanted to use equity in their Bridging finance gave our client the opportuCHARGE DEVELOPMENT propertyBRIDGING as a gifted deposit. nity to purchase theSECOND property and the land, as Their first charge mortgage had high early well as fund the building work on the additional MORTGAGES FINANCE FINANCE redemption charges – making a remortgage improperty. practical.

The specifics: With their son about to fly the nest, they also Loan amount: £480,000 had a need to downsize.

Property value: £695,000 This meant the borrower would be looking Term: 12 months to sell their property within the year… which Product type: First charge bridging loan also ruled out a second charge mortgage, as this Exit: Sale of property would result in high early redemption charges.

Their solution? A bridging loan on the propClient wants to renovate erty as a second charge. distressed property and rent, With this option, the applicant was able to gift through bridge-to-let the deposit and have time to find a new property As an interesting aside, landlord clients are inof their own – before refinancing onto their next creasingly looking to bridge-to-let options. They mortgage. are seeing acceptable rental yields harder to come Despite preconceptions that bridging finance by – through tougher affordability stress tests, is expensive, by avoiding ERCs the overall cost of MEES energy efficiency regulations and the finance was cheaper than more traditional routes changes to tax relief for mortgage interest payin this instance. ments.

The specifics: Landlords and developers are seeking out disLoan amount: £64,000 tressed and derelict properties that are in need of Property value: £695,000 repair and - using bridge-to-let - bringing them Term: 12 months up to standard and adding them to their rental Product type: Second charge bridging loan portfolio.

Exit: First charge mortgage With our new buy-to-let range, we can support borrowers in this way, too.

0333 1234 556

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39

West One Loan Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 510024. West One Secured Loans Ltd is authorised and regulated by the Financial Conduct Authority. Firm Reference Number: 776026. Certain types of loans are not regulated, for example loans for business purposes or certain buy-to-lets. West One Loan Ltd is registered with the Information Commissioners Office. Registration Number: Z2651210. West One Loan Ltd is registered in England and Wales. Company Number: 05385677. West One Secured Loans Ltd is registered in

More than a partnership.

With over £795m already lent to SME’s to date, Assetz Capital have the perfect alternative finance solution to suit your client, whatever their needs may be. We are flexible in our approach and we know there’s no one size fits all.

Get a decision-in-principle within 24 hours: 0800 470 0430

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Development

P2P AND DEVELOPMENT

G

one are the days when SMEs would investors on the platform, and the appeautomatically turn to their bank as tite to invest in ambitious developments. a first port of call for funding. There In fact, we have lent almost £800m to are probably a number of factors driving UK businesses since our inception in this – difficulty in getting credit approval, 2013, with over £400m ploughed directthe length of time an application takes, a ly into property development which has move to telephone banking for swathes of helped to create over 3500 new homes.

Damien SMEs used to having face-to-face contact, A good example of where Assetz Druce and most notably the phenomenal growth Capital has been able to support an director of in the popularity of alternative finance. A intermediaries, ambitious development plan would be good example of the latter being peer-to- Assetz Capital Winrise One. peer lending, through which platforms there The Leicester-based developer sewere £3bn worth of loans facilitated during cured £6.4m of funding to support the 2018, according to the Peer2Peer Finance construction of a purpose-built student Association. accommodation (PBSA) unit in NotOne of the other most important factors in tingham, comprising of 124 studio apartments. the growth of peer-to-peer is around speed of The project marks the first large-scale venture response. Lengthy processes operated by traditional lenders can make applying for funding a “As business owners continue stressful and daunting task. to embrace the rise of alternative Developers require decisions in a timely manner and cannot afford to wait weeks or months finance, lenders need to for a response, which could ultimately result in constantly evolve to stay a rejection. The lack of red tape means peer-topeer lenders are far less restricted and have the ahead of the curve” ability to approve credit applications in a short timeframe.

As business owners continue to embrace the by the developers, with the firm having previrise of alternative finance, lenders need to conously completed small-to-medium sized projects stantly evolve to stay ahead of the curve in what’s across Leicester. becoming an increasingly competitive market.

Construction on the ‘Rise Nottingham’ project The looser restrictions also allow peer-to-peer commenced in June 2017 and was completed in lenders to develop innovative products that meet September 2018. Prior to completion, all units new demands from borrowers. were successfully let to students, allowing the deFor example, we developed our residential veloper to refinance the loan into the mainstream refurbishment loan to help customers looking market. to access capital either to buy, refurbish and sell This is exactly the type of deal that we as an houses or flats, or to develop and invest in single alternative finance provider are able to support, properties. where a traditional lender would slam the door This has helped borrowers make their investshut. We are keen to work with business owners ment properties more attractive to renters or prowho may not have the credentials required for a fessional, private landlords looking to improve bank loan, but do have the ambition and drive to the resale value of existing homes. fulfil impressive projects if they had the capital At Assetz Capital, we now have well over 34,000 to invest.

Guide to Specialist Finance – brought to you by Mortgage Introducer

41

Development Finance

TALES FROM THE HOSPITAL BED

W

hen I was asked to do a short that shortage, which means we also still piece on why people should use need development finance, it just needs to a development finance I was be focussed in the right areas. This lends happy and in the Seychelles working on a itself to specialist products and innovaproject, however, since then I have had a tion, something we should seriously conrather nasty episode leading to a heart atsider. tack and the joyful thought of a quadruple Let’s stop just focussing development Terry bypass in the next few days… not the best finance on high end property and look Pritchard director, news in the world (this is quite a shock closely at affordable housing and midas people have been telling me for years I Charter HCP range property to fulfil a need. I am not have no heart). Despite this life does go on for one minute saying developers should and I need to occupy my mind whilst I wait for stop doing what they do best just that they realthings to happen, so, you will have to put up with ise there is more to social and affordable housing my drivel if that’s ok. than they currently think or allow for.

So to the question in hand “why use developIn exchange for their change in focus the ment finance”? The obvious answer is that it is the government should and will have to soon rebest funding option for their project, however, view the policy on specialist grants in this area. the fact of the matter is that there are a number of The point I am trying to make is that all forms different forms of development finance with the of development finance have their place but we two most obvious being straight development fihave an opportunity to be more innovative, and nance, which is cheaper and longer but more difthat starts with lenders offering a better range of ficult to attain as it is less risky for the lender, and products and services to encourage a change in bridging development finance which is less risk view. I strongly believe that as a nation we can be averse but more expensive and generally shorter a leader in finance for this field, so, I ask everyone in term. to take a close look at not just what development The fact is that both have an essential role in finance is but how it moves forward and how we the current climate but despite the unusually make something more suitable for the country’s stagnant time in the UK economy we still have a needs, not just for quick profit for individual housing shortage and we still need to provide for groups. Hope to see you all soon.

42

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