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Category: Bridging Finance News

bridging finance

Bridging Finance – Unregulated Lenders Become Popular

A constantly changing political and economic market has made bridging finance a more attractive option when the need to complete a deal is urgent. It’s interesting to note that despite the high street banks tightening the criteria for bridging loans, the market has grown.

This is mostly due to the increase in popularity of unregulated lenders. Are there risks? Of course there are, but a reputable broker won’t put a new client at any foreseeable risk, and these lenders keep the market buoyant.


Bridging Finance – A Need for Broker Understanding

Recent research undertaken by Hope Capital revealed that as many as 20% of brokers didn’t quite understand the bridging process. This research also revealed that over half of the brokers felt that more flexibility was needed on LTVs.

Just under half also expressed the need for lenders to increase the speed of service. Combined with a reduction in rates, they felt it would improve market accessibility.

The research also revealed common issues that continue to dog the application process for bridging finance. By far the most significant complaint was delays caused by solicitors. Additionally, collating client information and lender approval came a close second.

Jonathan Sealey, CEO at Hope Capital, said, “Like any area of lending, there are areas that brokers would like to see improved. We are keen to address these by always offering the fastest turnaround times”.

Bridging finance increased by 10% during 2017. A clear indication that brokers are turning to bridging lenders to cover gaps that the high street market cannot fill.

It has also become clear that because every client is different, brokers are looking for solutions specific to their client’s needs. Calling for lower rates has been a feature since lending for property finance began. This won’t change, and it is the state of the market that will ultimately dictate how low a lender will go.

Growth in the bridging market is providing more opportunity for unregulated lenders and a good broker will know which ones to turn to. Signals indicate that the market will continue to grow year on year as the regulated industry clamps down on lending criteria.

This does not need to hurt property finance. It is quite possible that emerging unregulated bridging lenders will discover a niche that enables the property market to prosper. Especially for property developers.

buy to let

Significant Buy to Let Changes from Aldermore

The buy-to-let market has experienced the implementation of significant tax-related changes. The changes have created problems mostly for individual landlords.

It has also reduced the introduction of new speculative landlords to the property market. Individuals are now discouraged from developing large property portfolios unless they form a limited company to enjoy the tax relief available.


Company Landlords Benefit from the Buy to Let Changes

The market has been waiting for a change to provide additional relief to both developers and buy-to-let landlords. Aldermore the specialist buy-to-let financiers have responded to the need by introducing new, more flexible mortgage products. From 23rd April, company landlords have been able to access the company’s more flexible mortgage products. These were previously only available to individual landlords.

The bank has reduced its early settlement fees. Furthermore, it is now offering remortgage products that don’t bring legal, product, or valuation fees with them. This fee structure makes a difference that will offer an impact to all their clients. Additionally, there will now be reduced rates to mortgages for multi-unit freehold properties and HMOs.


Competitive Rates

Rates start at 4.38% for the HMO and multi-unit freehold properties. This is for a two year fixed rate product and 75% loan to value. They have also reduced term variable rates across the range of their products. Some rates start as low as 3.28%. Their new remortgage products also enjoy no product, valuation, or legal fees either.

Aldermore is also rewarding their existing customers. Multi-property mortgages with discounted rates are available for those that have been loyal customers. Clearly, it pays to stay. New customers that submit a second or subsequent application or those seeking a remortgage will enjoy these products too.

They have also made it easier for landlords that have only recently started trading. Only one year accounts will now be necessary for those that are self-employed. A reduction in early repayment charges makes the offer even more attractive.

Aldermore’s commercial director of mortgages, Charles McDowell, says, “The sector has experienced significant change recently. So we regularly review our products to ensure we continue to support a broad range of customers. No matter how big or small their portfolio is”.


Technology Changes Improve Accessibility

Their own research has indicated that 41% of landlords intend to increase their portfolio over the next year. Interestingly, 15% of those that are not intending to expand will still seek to remortgage some of their properties.

Aldermore clearly understand how making changes to their products not only supports the industry but their customer base too. Focusing not only on financial accessibility but on technology too, customers can access their mortgages from their mobile phones too.

From April 23rd, brokers have been able to access their portal, get a quote, or submit a decision in principle from any device. This facilitates quicker decision making and access to the finance in a market where circumstances change really quickly.


Second Charge Bridging – Are The Lenders Disappearing?

Whether you are based in Cardiff, Birmingham, Glasgow, or Dublin, there will be property that needs to be financed outside of the conventional norms.

This can be because there is high pressure to close the deal. With competitors lurking like vultures ready to snap the opportunity from you, you may want to act quickly and decisively. Second charge bridging is often the route to take.

Frequently, there is something that is holding up the process. Individual home buyers could be waiting for the settlement of their current home sale. It’s even possible that their current property has not yet been sold. A second charge bridging loan is needed. And urgently.


Second Charge Bridging

Second charge bridging loans are a little different from regular bridging loans in that they cover the balance required for borrowing when there is already a current mortgage in place.

This kind of bridging, however, only takes place when there is sufficient equity in a property to support the lending. Finding a lender to provide finance for this kind of situation is not as simple as walking into a high street bank.

Most lenders that will offer second charge bridging will be non-status lenders and will take less interest in your credit history and details of income. They will, however, take a far greater interest in the property itself. The worry is that as Brexit approaches are these lending sources going to dry up?


Are Bridging Lenders Drying Up?

Most bridging lenders borrow from wholesale banks and then pass the tight terms on to their customers. The very nature of bridging loans means that the margins are cut very thin.

For the lenders, this kind of lending can become difficult as economic seas become rough. To catch up on the current housing shortage, the UK needs to build 250 000 new homes every year. In 2015, only 143 000 were built.

The four wholesale banks that provide the finance for second charge bridging lenders have been reviewing their position and winding back on this type of lending.

Rather than cause a shrinkage in the market for second charge bridging, it appears they may, in fact, have created a void that other non-conventional investors are willing to fill.

As Brexit draws closer, the property market may be flatlining in some areas. It, however, hasn’t fallen through the floor as some pessimistic forecasters suggested it would.

The availability of bridging loans remains a feature in the property market. It, in fact, may well be the financial product that keeps the market going. This bodes well while we negotiate our way through the economic uncertainty that many feel over Brexit.


Economic History Suggests Differently

In fact, the demand for bringing loans has increased since the Brexit vote. This may well be an indication that investors have faith that the market will grow again steadily once the dust has settled.

When we look back at the financial crisis of 2007 and 2008, retail mortgage deals dried up rather quickly. This left the market ripe for second charge bridging lenders to take the opportunity to keep the property market afloat.

When things became more difficult economically, it would seem that bridging lenders flourished. Bridging lenders do, however, need to assess their customers’ situation. This is to ensure they will not get into financial difficulty during the duration of the loan. Typically, a period of between one month and one year.

The economic circumstances that demand the necessity for bridging loans create unexpected byproducts, however. Terms that were unacceptable yesterday will become completely acceptable today, just to get the loan.

To explore the best possible terms for second charge bridging, you will need a reputable and experienced broker. Although based in London, Belgravia Property Finance provide advice and support for properties throughout the UK, including Scotland and Northern Ireland.

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