Donna Wells, Director at F4B
It’s getting to that time of year when I suspect that we’re all looking forward and, quite frankly, happy to see the back of a year that has placed such a strain on all our business and personal lives. I don’t want to dwell too much on the hardships we have faced over much of 2020 but, when battling through any period of adversity, it’s important that we learn from this and turn negatives into positives where possible to successfully move forward.
Arguably the biggest lessons we have learned as a business is being able to adapt quickly and how vital it is to have a robust support network in place. Operating as a packager in the short-term finance space we know how to act fast. Unlike many other forms of finance, clients need funds in their bank accounts within hours or days. They need to move swiftly because, generally speaking, the purchase is so time sensitive. If the buyer cannot complete to the seller’s schedule, then any preferential terms may be withdrawn, and the resultant deal cancelled.
Speed has always been of the essence in this sector but we are currently having to adapt even faster to deal with daily changes to products, policy, criteria and service levels. From an external perspective, short-term finance has previously been viewed as complicated, expensive and irresponsible. This was even the case amongst some advisers. I’d like to think that these preconceptions have been banished. Although it’s fair to say that some additional complexity – in relation to the factors mentioned above, plus funding constraints and additional risks attached to lending – is making it even more difficult for less experienced brokers to keep on top of ever-changing client and provider demands.
This means that such advisers need additional support to ensure that their clients have access to the types of short-term financial solutions which will become increasingly important as the stamp duty deadline approaches. In addition to residential purchases, a variety of investors are also becoming reliant on bridging finance to ensure that purchases can be pushed through in time to take full advantage of this tax break. A factor which also underlines the importance attached to a well-rounded advice process and access to alternative forms of lending where necessary.
This is one reason why we recently launched our free 24-hour case checker initiative. This is aimed at providing an option for brokers who may not be specialists in short-term finance to double-check lending terms received to help ensure they have sourced the most suitable product and lender to match their client’s requirements. And from speaking to advisers, it is working to provide an additional layer of security as well as highlighting the benefits attached to this important area of the specialist mortgage market.
As alluded to, this importance is only likely to grow in the coming weeks and into 2021. Despite the obvious challenges 2020 has thrown at us, demand for short-term finance has remained strong throughout. According to lender MT Finance, bridging activity rose by 46 per cent in July to September, compared to the previous three months. Although lower than pre-Covid-19 levels, lending hit £116m during Q3 thanks to an influx of customers who would normally take out loans at high-street banks. In a trend which is a world away from the mainstream mortgage market, many short-term lenders are supporting this growing demand by increasing their maximum loan-to-value ratios and loan sizes. Which is certainly helping them to become a more attractive option.
Education continues to play a key role in this support process and we are looking to help more advisers understand the potential benefits attached to specialist lending, turn away fewer client enquiries and generate more revenue without wasting their valuable time on cases which may never be accepted. This is leading to a growing number of advisers taking advantage of the experience and expertise of packagers to tap into the rising demand for alternative forms of finance. And we, as a business, are now in a far stronger position to support them on this journey and help more non-specialist brokers bridge the alternative lending gap.