The most frequent search in the bridging market was for ‘Covid-19 temporary maximum LTV restrictions’ – one that has, for obvious reasons, not featured at any stage previously. There have been hundreds of new criteria added by lenders in the wake of the spread of the coronavirus; at one point, across the entirety of the market, Knowledge Bank recorded more than 500 new criteria from 14 different lenders within the space of one 48-hour period.
Also featuring in the top five bridging searches were ‘minimum property value’ and ‘maximum LTV for bridging’ – reinforcing the impression that borrowers are looking to gain maximum leverage from their assets.
The demand for short-term finance is undoubtedly still there, but with uncertainty over the impact on property prices and rental values, and the inability (up until recently) of valuers to visit properties in person, lenders have been forced to severely curtail lending. Many are cautious when it comes to the reliability of desktop valuations and have acted accordingly by reducing their maximum LTV or temporarily exiting the market. As a result, brokers have been forced to hunt around for lenders which are able to offer higher LTVs, and also manage their clients’ expectations as to how much finance they are likely to be able to access.
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In the commercial lending market, meanwhile, the criterion most searched by brokers was ‘maximum LTV for commercial investment’ – not a wholly new visitor to the Knowledge Bank league tables, but one that had not featured in the top five for March. There have been well-documented problems in the commercial property market long before Covid-19 landed on these shores, but the shutdown of most commercial premises has clearly exacerbated these difficulties. Commercial landlords seem to have joined the hunt for high LTV loans.
The surprise here is perhaps that there has not been more fluctuation; four of the top five searches in the commercial market, and three out of five for bridging, are the same as in March.
This suggests that while supply has been restricted, demand for borrowing remains robust. Indeed, for many, short-term finance may be exactly what they need, to buy them time to ride out the crisis and get back to generating income streams once the lockdown is lifted.
We are now starting to see lenders coming back to the market and expanding the range of products available to meet this continued demand. But criteria continue to change at an overwhelming rate, so brokers need to be able to stay on top of this to give their clients the service they need.
As our contribution to helping broker and lenders during the crisis, Knowledge Bank has created a completely free tool for brokers to access the information they need. This is being updated in real-time by the lenders themselves as they announce their policy changes. The market is evolving at an incredible pace and it has never been more important that technology keeps up.