There's an increasing demand for bridging and buy-to-let financing, says BDM
The specialist market has shown its resilience over a challenging few years, with greater numbers of brokers and customers turning to it as an alternative source of funding, it’s suggested.
Mark Hutchings (pictured), business development manager at specialist lender Market Financial Solutions (MFS) has identified an increasing demand for bridging and buy-to-let financing.
Recent figures, based on data provided by members of the Association of Short Term Lenders, show an increase in bridging loan completions in the fourth quarter of 2023, rising by 18.4% on the third quarter of the year to reach £1.69 billion.
Loan books also continued to rise in Q4 2023, increasing by 4.2% to reach a new high of £7.6 billion, while average LTVs increased to 58.7% in Q4 2023, up from 57.7% in Q3 2023.
“I think the past few years have shown the strength and durability of the specialist market, which is why we are seeing more and more brokers and direct clients turning to specialist finance as a viable option,” Hutchings told Mortgage Introducer.
“We can work around complexities, non-perfect credit scores, and the concerns that mainstream lenders may have – we’re here to find the solutions and keep the property market turning.”
He noted: “While there are still many challenges facing brokers and their clients, from economic difficulties such as inflation and the potential change in government later this year, to ongoing concerns on borrower affordability, we are still seeing an increasing appetite for bridging and buy-to-let financing.
“The specialist market is continuing to grow as mainstream lenders tighten their criteria. However, the uncertainty is settling. Specialist lenders are stepping up once again, where high street lenders are retracting.
“What we should be keeping our eye on will be inflation and the potential for a finally decreasing base rate.”
Enabling the refurbishment of derelict properties
What could the government - currently or incoming - do to support the industry?
“Some of our more recent research surveys have focused on this topic,” Hutchings said. “What we’ve seen is many are interested in utilising derelict properties but struggle to find a way to work cohesively with council planning permission, and also find there is a lack of financial schemes to help support these endeavours. With the housing crisis only escalating, it would be great to find a way to make these refurbishment plans a reality.”
According to the Bridging Trends 2023 report, produced by MT Finance, the average loan completion time was 59 days, the average loan term was 12 months and the average loan-to-value was 57%.
Hutchings believes brokers need to be up to speed with the specialist market.
“My advice would be to take the time to understand what specialist finance is, if you’re new to the market, but above all, to make sure you find the lenders that are right for you,” he suggested.
“There are lots of us in specialist finance, but we all have our own niches. Here at MFS, we like to work up front and underwrite from day one so that we can conduct all the heavy lifting and, should it be needed, find solutions ahead of time.
“We’re also heavily focused on education because we believe a more informed market makes for a better one. Over the past 12 months, we’ve seen an uptick in new brokers and clients turning to specialist finance. That’s why we’ve generated new complete guides on a range of specialist finance topics.”
MFS prides itself on being one of the longest-serving specialist finance providers, since it was founded in 2006.
“We’ve never once stopped lending,” Hutchings said. “We specialise in the complex, whether it be adverse credit, large HMOs or other quirky property types, or foreign nationals and expats. We have multiple funding lines, and when we say yes, we actually mean it.”
Read more: Property investors remain confident despite challenges
What is the future for specialist finance?
The business development manager remains confident about specialist lending’s future prospects.
“I think the specialist market will continue to grow,” Hutchings observed. “We’re already seeing a lot more enquiries come through.
“I think the versatility of specialist finance is what makes it so engaging. Every day we face new challenges in the market, and the flexibility of our products allows us to find new and exciting ways to plug these gaps and assist borrowers with their property investment goals.”
