It’s certainly an interesting market out there at the moment, as we seem to be in the midst of huge conflicting shifts with specialist lenders.
In just the last few weeks, we’ve seen lenders restructuring businesses, with whole departments being reworked or made redundant. Some are scaling back, while others are driving forward with vigour, with new strategies and incentives to gain an ever-increasing market share.
In the bridging and commercial space, we’re seeing lenders start to offer incentives covering costs of valuations and legals, which is very welcome. Embracing technology means that systems are becoming more slick, with the roll-out of more automatic valuation models (AVMs) across bridging and buy to let (BTL), giving a swifter, streamlined process for investors and brokers alike. I look forward to the day when we can move away from form-based, email-led applications across the board.
BTL stress rates improving but single let properties ‘less desirable’
While BTL stress tests are certainly more favourable than they were a year ago, the lower-yielding single let properties are still a less desirable investment option to many. We’re seeing clients drawn into the more complex properties, including houses of multiple occupation (HMOs), multi-unit freehold blocks (MUFBs) and semi-commercial. Many of our first-time investors are keen to leapfrog straight into these properties, rather than easing in with their first single let. Lending options for these keen entrepreneurs can be more limited, so an open-minded lending approach is commendable here, for the right client and proposition, of course.
The guaranteed rents provided by third parties such as supported living providers have become an attractive offering. On a personal level, I’m really pleased to see this. I stepped into my finance career five years ago, having spent a lifetime designing and commissioning these services for local government.
This gives me a real passion for this space. I see finance as the vehicle to developing safe inclusive communities we all aspire to be part of. It’s positive to see that lenders are encouraging of this market, though we need to see some more forward thinking here – better join-up between local authorities, support providers, developers and lenders would be a great start, and I would welcome any opportunities to explore this with others.
Developer and self-build enquiries ‘coming in thick and fast’
In our brokerage, developer and self-build enquiries are coming in thick and fast. There’s a real draw for the self-build novice as they compare the prices of buying their dream home versus building it.
Developers are showing more interest in land and commercial to residential or single unit to HMO, and the bridging market has a great range of options to meet this. The increasing volume of enquiries makes me wonder whether we are nearing our sweet spot between interest rates, opportunity and housing prices. Are people moving away now from the expectations of an imminent housing price crash?
I know many developers are hoping so as they seek exit finance to hold assets that bit longer, anticipating that the regulated market settles, to encourage higher sale prices and a more palatable interest rate for their purchasers. Let’s see what the next few months hold.
