Regulation creates 'huge' opportunity for specialist lenders




Regulatory changes are likely to result in a wider range of properties being lent against during 2017, a lender has revealed.

Last week, Octopus Property reported a surge in the number of agreements in principles for its buy-to-let products during the last quarter of 2016.

This came despite the introduction of stricter affordability measures by the Prudential Regulation Authority (PRA) from 1st January 2017. 

Now, D’mitri Zaprzala, head of sales at Octopus Property, has suggested that these new regulations have driven borrowers with less common requirements towards specialist lenders.

“As the year went on, and in advance of the new PRA regulations … we saw a material increase in applications for buy-to-let properties where the client and/or asset would [have] been classed as ‘non-standard’ by traditional funders.

“The great thing about this is that many of the clients coming to us are strong borrowers, but ones that now look a little bit too adventurous for the mainstream banks.

“The new regulations make sense, but they are creating huge opportunities for more agile lenders like ourselves, who are able to make decisions on a case-by-case basis.”

‘Lenders need to be flexible’

D’mitri stated that this surge in new applications could result in the firm seeing greater variation in the types of property being used as security.

“More than ever lenders need to be flexible and sensitive to clients’ needs.

“As people chase yield, we expect to see an increase in HMOs [houses in multiple occupation] and semi-commercial properties.”

Meanwhile, Keith Aldridge, managing director of Amicus Property Finance, said he expected to see growth of one particular type of property during 2017.

“Considering we funded over 500 residential units under permitted development rights in 2016 and continued to forge relationships with developers focusing on converting office to residential units, we are very optimistic of exceeding that number this year.”

‘The market is still moving upwards in value’

However, rather than anticipating a change in securities being lent against, Claire Barrington-Jones, director of sales at Borro, insisted that the luxury asset lender had already seen a marked change during 2016.

“Last year there was a noticeable increase in the variety of assets being used as security,” she explained.

“Clients may have initially borrowed against a single asset, but 2016 saw those same clients return with combinations of investment properties and luxury asset collections as they sought to take advantage of the opportunities market uncertainty created.”

Steve Smith, business development manager at Roma Finance, also reported a difference, adding: "We have noticed a gradual price increase in properties; valuations are holding up and although small, it is noticeable that the market is still moving upwards in value.”

Unlike D’mitri, Steve argued that this change could be due to problems with the UK’s housing supply.

"There still seems to be a shortage of houses being built or, perhaps, more people living alone.”


Some lenders believe the falling pound will boost property investment from overseas

By contrast to Steve, Paul Wertheim, operations director at Mint Bridging, claimed that the falling pound had actually decreased the value of properties for some investors, and led to a 17-25% increase in loan size between the third and fourth quarters of 2016.

“England’s property prices are cheaper, especially for foreign borrowers, and long-term UK property investment is still proving to be an attractive and valuable good bet.”

‘A much wider selection of securities’

Regardless of what was happening in the market, D’mitri admitted that geography played a key role in determining the type of properties used as security.

“In 2016, we significantly expanded our geographical coverage and this in itself resulted in a much wider selection of securities,” D’mitri explained.

“From blocks of flats in the North West of England to HMOs in the Midlands, we are lending against a greater diversity of assets than ever before.”

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