National lockdown

Bridging industry responds optimistically to third national lockdown

On 4th January, prime minister Boris Jonhson announced a third national lockdown until at least half-term in February following a rapid rise in infections, hospital admissions and case rates across the country.

The drastic jump in cases has been attributed to the new variant of Covid-19, which has been confirmed by scientists to be between 50 and 70% more transmissible.

People who cannot work from home — including those in construction — can continue to travel to their workplace, which the government said was “essential” to keep the country operating and supporting sectors and employers.

Where it is necessary for people, such as tradespeople, to work in others' homes, they can also do so. 

The property market also appears to remain open, with guidance noting that people can still move home and go to property viewings, and estate agents and removal firms can continue to operate. 

“There are many people who have made legal commitments to buy, sell or rent, and need or have to move. This could be for health or financial reasons, a relationship breakdown or domestic violence  — whatever the reason, these moves can’t be halted even in light of the pandemic,” stated Jeremy Leaf, north London estate agent and a former RICS residential chairman.

“We will be returning to the protocols that we previously adopted and there will be a clear distinction between occupied and unoccupied properties. 

“While the property market remains open for business, the new lockdown will have some impact on surveyors [and] removals firms etc,” he added.

How is the bridging market reacting to the third national lockdown?

Unlike in the first lockdown, when valuers stayed at home and several lenders halted new business or became much more conservative with appetite to risk, the bridging market seems to be more optimistic this time round. 

“The government’s latest announcement is far from welcome, albeit understandable given the worrying infection and hospitalisation figures,” said Amit Majithia, principal at Avamore Capital. 

“With news of a vaccine at the end of last year, it is disappointing that we are now faced with our third cycle of lockdown measures, but hopefully we really are in the last stages of disruption. 

“The industry is in a relatively fortunate position in that in this lockdown, unlike the uncertain situation in early March, onsite construction is permitted to continue. 

“This is similar to the rules of lockdown 2.0 and will mean that we are able to maintain momentum and continue to complete on transactions.” 

However, it remains to be seen whether there will be a drop off in demand on the buyer side.

“The other issue that we will keep a keen eye on is the delivery of materials which is going to be affected not only by the lockdown, but of course increased border friction [after] the UK’s exit from the EU,” Amit added. 

Interestingly, in Q3 and Q4 2020, Avamore experienced a slowdown in the time between the initial enquiry and deals completing. “Feedback suggested that developers were assessing finance options well before they were actually ready to proceed,” Amit said, “and we suspect that borrowers will retain this cautious attitude.”

In terms of Avamore’s appetite to lend, it will continue to take “a prudent approach”.

“A theme which is likely to remain consistent is the increased interest in our product for part-complete schemes (finish and exit) which is specifically designed for developers that have faced unexpected delays and cost overruns during their project. 

“With further challenges presented through the stop-start nature of the past nine months and the end of CBILS on the horizon, we expect that developers will become increasingly dependent on the specialist finance market to provide them with support for their schemes and their cashflow.”

Nick Jones, commercial director at Roma Finance, expects it to be busier and short-term lending to be in heightened demand, with government financial support to continue for the foreseeable.

"The government won’t look to undo the hard work they’ve put in place for the past 12 months, however, the recovering of the spending during this time will need to start at some point, which is more likely in the Autumn or Spring of 2022. 

"The difficulty which customers will feel will be the exiting and finishing of property projects during lockdown.

"Project costs are likely to increase and timescales elongate, resulting in customers potentially overrunning, which will brings its own issues.

"However, if intermediaries and lenders work with customers for mutually satisfactory results then this will give the property market a much needed boost and protect everyone’s interests."

Andy Gray, senior business development manager at Ascot Bridging Finance, does not think the bridging industry will see any impact, and certainly not one that will see it come to a halt.

"The impact first time around was caused by uncertainty of what was happening and how to stay safe," he explained. 

"We were then further impacted with mortgage payment holidays and how this would be reflected on someone’s credit profile, surveyors not being able to get out and visit properties and lenders not having the systems in place for automated valuations or the appetite to accept them, and then the additional impact of exit lenders not having adequate resource for remortgages while dealing with increased volumes of clients impacted by Covid-19 financially.

"We now have the knowledge of the first lockdown to know how to stay safe while working, and how to make the right decisions to protect those who work for us or need our services if operating face to face.

"While other areas of the market may contract slightly during this period and may decrease appetite on areas such as LTVs, loan size, property type etc, many bridging lenders will continue as normal, reviewing each deal on a bespoke basis, assessing the relevant risks, and progressing forward accordingly."

Tomer Aboody, director at MT Finance, noted that with lawyers, valuers and agents all still working, this should limit any further delays to transactions. 

“It is now down to the comfort level of sellers in terms of allowing potential buyers in to view their homes and buyers feeling comfortable attending viewings,” he cautioned. 

“Our appetite to lend has not changed whatsoever,” he added.

“We feel the market won’t be disrupted as it was last year because there is an end in sight, thanks to the roll out of the vaccine programme. 

“This, along with the fact that valuers and solicitors can still work and there is still access to properties, should provide further confidence for the housing market as a whole.” 

However, he believes that the stamp duty holiday will need to be extended, if not made permanent. 

“The chancellor must look at the deadline again, in light of this unexpected lockdown.”

Andrew Montlake, managing director at Coreco, commented: “Though the property market remains technically open, there will now be considerably more logistical issues for the simple reason that a lot of people will be working from home.

“Lenders, valuers and conveyancers are already experiencing bottlenecks and delays given the sheer amount of applications going through, and the administrative upheaval caused by the latest lockdown will only serve to accentuate these.

“We would not be surprised if the treasury makes an announcement this week about extending the stamp duty deadline to keep demand alive and give the property industry some much needed wiggle room.”

Joseph Aston, national sales manager at Vantage Finance, thinks that with the SDLT exemption deadline looming, bridging will take “centre stage” in the coming months for professional investors trying to get purchases across the line. 

“Thankfully most of the WFH infrastructure among brokers/lenders alike is in place from the first lockdown, with the key, advantageous, difference being that physical valuations are being allowed to continue. 

“Overall, considering that there is optimism that this is a shorter term measure than last year and the vaccine is [here], I’m pretty confident that most expert brokers will be able to suitably put cases together that lenders are comfortable lending on, despite the lockdown restrictions.”

Russell Hasan, director of bridging at Rangewell, feels that as the property market has so many moving pieces, it’s "almost impossible" to see the way in which things will move in terms of bridging. 

“High street lenders continue to be very busy with Covid emergency loans and focusing their resources on the government-guaranteed lending," he noted. 

"As a result, they are almost ignoring property lending so, for property buyers, a bridge has become much more of a mainstream option, with the expectation that they will refinance with a mainstream lender when things start returning to normal.”

Another factor he explained that was boosting bridging was the increase in property prices.

"In the last six months, many 'hot spot' areas saw growth not seen since 2004. That means the speed of an offer is vital right now if a seller has two buyers.

"If one purchaser can complete in three weeks with the help of a bridge, and the other is a commercial mortgage with a two-to-three month lag, the bridger becomes the better buyer.”

Chris Fairfax, managing director at Catalyst Property Finance, pointed out that, unlike the first lockdown, this was more of a “known beast” and has an end point in sight.

“Catalyst was built to be adaptive; throughout the first lockdown we continued bridging lending with very little change to our risk appetite and, as long as the property sector remains open, this lockdown will be no different,” he stated.

“At this point, our valuer and solicitor panels remain open, and our intermediary partners and customers continue to be active.

“Although we wish there was no requirement for this lockdown, our team is prepared; we now switch from office working to remote within a matter of hours. 

“It is, of course, early days into the lockdown, but Catalyst returned into 2021 with a strong bridging pipeline and appetite to lend.” 

Mark Posniak, managing director at Octane Capital, confirmed that Octane will continue to lend as normal and will not be reducing its criteria. 

“In fact, we view this as another opportunity to provide the funding and support to our partners now, when they need it most,” he stated.

“Having made changes to our legal and valuation processes during last lockdown to cater for these scenarios, we will continue to work as fluidly as we can.” 

Jonathan Sealey, CEO at Hope Capital, said there was no doubt that the latest national lockdown measures would create many more challenges for the specialist lending market this year. 

"However, the team at Hope Capital now has the experience to adapt to a situation like this and react positively to ensure we provide bespoke and fast solutions to brokers and their clients. 

“We predict the demand for properties which accommodate space to support remote working arrangements will continue to grow, as well as the use of technology to enable services such as property valuations to keep going, while preventing face-to-face interactions.  

“Ultimately, the bridging finance industry has proven on numerous occasions that it is resilient and can bounce back in unprecedented times and 2021 will be no different.”

Simon Furnell, chief operating officer at Masthaven Bank, said that a willingness to develop new ways of working, adopt new technology, and innovate will continue to be vital. 

"Lenders should keep evaluating their current processes and considering where technology can create efficiencies and provide the kind of tailored solutions required by borrowers in this intensely challenging environment. 

"This latest lockdown will further complicate the personal finances of a great number of borrowers. Specialist lenders should play to their strengths and continue to judge each individual case on its own unique circumstances, finding the right solution for each borrower. 
“Indeed, the importance of the personal touch will only increase over the next few months. Having a customer support team that can understand the unique needs and circumstances of each customer will be crucial in helping people through the uncertainty that lies ahead. Small steps like proactively contacting those who most need our help, which Masthaven has been undertaking throughout the pandemic, will be increasingly important as we all return to a more isolated period.” 

Sam O'Neill, senior finance broker at Clifton Private Finance, thinks that lockdown 3.0 will be a testament to how well the industry as a whole has set up to combat 'the new normal'.

"I don’t feel there will be a detrimental impact to the industry, logistically, as lenders and brokers alike are set up to work remotely and by this point it certainly wont be new to them.

I don’t feel [it] will have a negative effect on lenders' appetite or brokers' performance either, as the end is in sight with the vaccine rollout; I think it is a matter now of digging in as we can see the light at the end of the tunnel.

"Perhaps I am being overly optimistic, but I think as surveyors are still working, [and] everyone is au fait with working from home, we are appropriately set up as a whole to get through this lockdown relatively unscathed.” 

Kunal Mehta, managing director at SDKA, commented that in the previous two lockdowns, as the banks reduced funding, the lender saw an increase in clients that had never used bridging finance before.

"We also supported more trading businesses than ever as raising finance from their banks proved difficult," he stated. 

"We naturally expect a surge in bridging finance enquiries as we enter the second half of February as buyers will want to ensure they complete before the end of the stamp duty holiday [on 31st March]." 

In addition to bridging lenders having learnt a considerable amount from the first and second lockdowns with regard to managing operational processes and day-to-day business matters, funding support also seems to be positive.

“…From a funding perspective, we have found our partners to be solid without exception in their support of our business and our business plan,” commented Colin Sanders, CEO at Tuscan Capital.

“They also remain positive about the prospects for the UK property market in both the medium- and long-term scenarios.

“Elsewhere, the approval and roll out of effective vaccines, and the fact that a trade deal has been struck with the EU, has at least offered some optimism to investors and funders despite the difficulties that lockdown 3.0 will no doubt present.”

Nick Hilton, managing director at Glenhawk, told B&C that, in Q4 of 2020, it was still working within a tiered system and completed over £30m of bridging loans.

"In the second part of 2020, we also had unprecedented enquiries, totalling over £800m, so the demand for this kind of finance is incredibly high.

"We are also being approached a lot by institutional funders. 

"I really don’t see this full lockdown differing from Q4 unless key third parties are impacted within their roles. The appetite for short-term borrowing seems strong and a key indication for this was receiving five new applications in the first day of 2021.”

Specialist lender Together has also confirmed its plans to continue lending during the third lockdown, across both personal and commercial divisions.

Commercial CEO, Marc Goldberg, said that the majority of the lender’s 530 colleagues are now working from home, but that automation of some back-office functions meant that Together’s brokers and customers would face as little disruption as possible. 

“Further innovations to improve the journey for brokers and customers are expected later this year,” he revealed.

“…Although it’s difficult to predict the future in such turbulent times, we’re confident that we have the right mix of experienced and knowledgeable colleagues to be able to meet the high expectations of our commercial and personal finance brokers and customers.”

Marc also highlighted that the demand for commercial property “remained strong”, despite the challenges posed by the pandemic, and expects this to improve in the last two quarters of the year.

“The short-term lending market, as it has shown in the past, is very resilient,” commented Narinder Khattoare, CEO at Kuflink, which continued to lend throughout the first lockdown.

“I don’t see much that will change for us under the new lockdown restrictions, and we now have the prospect that the vaccine rollout should prove to bring the pandemic under control.

“Our P2P platform, built exclusively on individuals' private investment, powers our bridging and development finance funding. This has just topped the £100m mark, which means we will have further capacity in 2021 to meet more of the needs of intermediary customers seeking short-term finance. 

“As we have no institutional funding lines, we are not constrained by their requirements, which in times of economic upheaval such as last year’s lockdown, proved to be disruptive to other lenders which relied on institutional funding.” 

Jack Coombs, managing director at Aspen Bridging, said that the bridging lender remained confident that the property market would show resilience, given the approval of the Oxford vaccine and recent Brexit deal.

“Being set up for remote signing and desktop valuations where needed means we can expect to continue lending in greater volumes than ever in Q1 of 2021. 

“In support of this, we will shortly be announcing two new product launches and positive changes to our lending criteria, showing our aim to continue to expand our loan book through 2021.”

“While we are in the midst of a pandemic, it is clear that there is still demand for property,” added Paresh Raja, CEO at MFS. 

“This was obviously helped along by the stamp duty holiday. However, In times of volatility and uncertainty, people tend to gravitate towards assets that are not only positioned to deliver returns, but can also provide some kind of security. 

“Property effectively ticks both these boxes — it is a tangible asset that has historically been able to recover quickly from disruptive periods.

“In turn, this means that there will be sustained demand for bridging finance while mainstream lenders are struggling to deal with the levels of applications they are seeing, as well as their inability to be as flexible and move as quickly as specialist and short-term lenders can.

“We are still lending on 75% LTV deals [and funding] both first and second-charge requirements, and we are deploying our Covid recovery fund to help borrowers.”

Roxana Mohammadian-Molina, chief strategy officer at Blend Network, welcomed the government’s move to introduce tighter restrictions in order to control the spread of the virus, but also supported the effort to keep the housing market moving, as the sector had strongly contributed to the UK’s economic recovery during the second half of last year.

“At Blend Network . . . we [have been seeing] a surge in loan requests from property developers and investors looking to build or refurbish,” she said. 

She attributes some of this increase to certain lenders pulling out of deals previously agreed on. 

“It has also been an opportunity for the government to see that P2P lending must be part of the solution if we are serious about tackling the unprecedented housing crisis the UK faces.”

Following on from last year’s trend, demand for housing seems to continue to be strong with consumers still searching for new places to live. 

However, Jason Berry, group sales and marketing director at Crystal Specialist Finance, believes traditional house move chains will stall at increasing levels in the coming months as buyers try to meet stamp duty deadlines, or simply fail to meet tightening lending criteria. 

“This should bode well for the bridging sector where speed and agility have always been prevalent.

“Our appetite to deliver an excellent customer outcome at all times remains and we are committed to ensuring we educate the broker sector so unwanted placement stresses and process strains are taken away.” 

To support this, the brokerage has scheduled a series of webinars for Q1.

How the rest of the specialist finance market has responded

Chancellor Rishi Sunak announced £4.6bn in new lockdown grants on 5th January in order to assist businesses with getting through the months ahead.

He tweeted that the support package aims to help sustain jobs so workers can be ready to return when they are able to reopen.

Retail, hospitality and leisure businesses can claim up to £9,000 per property, while a £594m fund will support “other impacted businesses”. 

This comes on top of the furlough extension until end of April and government-backed loans — including CBILS, CLBILS, and the Bounce Back Loan Scheme — being extended until the end of March. 

Ben Barbanel, head of debt finance at OakNorth Bank, said that the lender was confident that despite the third lockdown, it would continue to lend and support strong British businesses, as well as property developers and investors. 

“Last year, despite the ongoing challenges being presented to businesses and the property sector by Covid-19, we approved over £2bn in new loans — a significant amount of which was via CBILS and CLBILS.

“It’s also worth noting that a key difference between this lockdown and the first one in March last year is that construction sites are allowed to stay open this time — this is very positive for the sector as it means projects can continue without delay or as much disruption.”

Douglas Grant, director at Conister, part of AIM listed Manx Financial Group, said that the lockdown was yet “another crushing blow to SMEs across the country”. 

"While demand has exceeded supply, the BBLS and CBILS have played instrumental roles in keeping many resilient SMEs alive during this uncertain year and have acted as important triage systems to identify and support viable businesses that needed credit.

“However, we believe that there needs to be a continued tripartite level of sustainable support from government, alternative and traditional lenders working together to identify and protect the more resilient sectors of the economy, ensuring their existence is guaranteed. 

“After vital financial aid, SMEs need the government to support their sectors with widespread and long-term growth initiatives that allow them to flourish.” 

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