Donna Wells, Director at F4B
We fully expected 2021 to be hectic and this has certainly proved to be the case, maybe even more so than we initially predicted. As a business, we have experienced some record months over this period. These volumes have largely been driven by the juggernaut that is the purchase market and with the lending capabilities (and willingness) of some traditional lending institutions still limited, there has been an increased emphasis on alternative, specialist and short-term solutions for a variety of residential property acquisitions.
There has also been huge uplift in activity levels across all areas of the BTL sector as a range of investors continue to take advantage of some favourable market conditions, highly competitive rates and strong service levels, especially from specialist lenders. Growing numbers of landlords are turning to these kind of specialist offerings as they look for additional flexibility on how interest is serviced and lending decisions based on some unconventional circumstances.
Additional complexity throughout the lending marketplace also means that more intermediaries are turning to packagers for support when placing less than straightforward cases, and this is a trend which we expect to continue.
Popular uses for bridging
Focusing on short-term finance, as an adviser, it’s always prudent to keep track of how this is being utilised. According to the recent Bridging Trends report, the most popular use of a bridging loan – for the second consecutive quarter – was to fund a chain break. This was said to have contributed to 20% of all loans in Q1 2021. Purchasing an investment property was reported as being the second most popular use in Q1. In addition, the report revealed an increase in demand for bridging loans for business purposes from 10% to 14% in Q1 2021, as businesses ready themselves for lockdown restrictions easing.
Other significant results highlighted in the report suggested that:
- average LTVs rose to 55.2% from 51.3% in the previous quarter
- average weighted monthly interest rate went up to 0.74%, still cheaper than pre-Covid levels (0.80%)
- average bridging loan term climbed to 12 months, falling in line with the same quarter in 2020
- average bridging loan completion time increased to 53 days, the highest figure recorded since Bridging Trends launched.
The report also highlighted how bridging finance continues to be an increasingly attractive proposition for those buyers who are looking to save their delayed property purchases. In terms of criteria searches made by bridging finance brokers during Q1, ‘maximum LTV’ was the most popular term, followed by ‘regulated bridging’ and ‘minimum loan amount’, according to additional data supplied by Knowledge Bank.
The importance of packagers
For brokers who may not specialise in what remains a hugely complex lending environment, it’s not easy to realise exactly what borrowing scenarios any given lender will accept and what they will reject. Or gain access to all the available products. Of course, lenders are constantly trying to communicate any changes to their product ranges and criteria tweaks to the intermediary market but if brokers are not writing regular business in the short-term finance sector, this messaging can often get lost or soon become outdated. Which is why they have become so heavily reliant on the expertise and experience offered by packagers and specialist distributors.
For packagers and specialist distributors operating in the modern market, it’s all about adapting and evolving to ensure that we are constantly delivering the right results in the most secure and efficient manner possible. As such, here at First 4 Bridging, we recently partnered with Nivo to deliver a secure instant messaging and document gathering service for our growing number of intermediary partners and introducers. The service helps advisers to navigate the requirements for certified ID, usually provided by a solicitor. Clients can e-sign documents, upload payslips and verify their identification using Nivo’s facial recognition process to simplify and speed up the application process.
Speed, accuracy and transparency are key factors in successfully maximising the benefits attached to a range of short-term solutions. Packagers can also greatly reduce borrowing timeframes. For example, our average submission to completion time is significantly less than the 53 days stated on the Bridging Trends report. And this is just one of the reasons why packagers will remain a vital conduit in helping intermediaries and their clients to achieve their property-related goals over the second half of 2021 and beyond.