It's the lender's reputation that will be impacted if a valuer or solicitor doesn't deliver, warns broker

Earlier this week, Bridging & Commercial hosted a virtual roundtable in partnership with Market Financial Solutions on the topic of ‘Reacting to the Budget and investors’ changing attitudes to alternative finance’.

The live event was held on 23rd March and moderated by Beth Fisher, editor at Medianett, along with MFS’s executive director Tiba Raja and business development manager Imogen Williams. 

The panel also included Jason Caprioli, lending director at Kingswood Associates; Mathew Phillips, finance broker at Clifton Private Finance; Piragash Sivanesan, founder at Totum Finance; and Nick Mayhew, director at Peak Business Finance.

On the subject of the extension of the stamp duty holiday announced in the Budget earlier this month, Mathew claimed that the main stumbling block for completing before the SDLT deadline is around solicitors being “inundated” with work across residential mortgages, BTL, commercial and bridging.  

Piragash agreed that legals were delayed, but emphasised that, from the client’s perspective, it will generally boil down to an issue with the lender. 

“If the solicitors are delaying things, we don’t want the excuse of, ‘It’s the solicitors,’ because, as far the client’s concerned, it is the lender

“Really, we and the client hold very little power; the [one] that’s really in control and is actually paying the third-party professionals is the lender. 

“It’s so important for them to realise that it’s their reputation [on the line] when a solicitor or valuer doesn’t deliver,” he added.  

When a member of the audience asked whether a client who takes out a bridging loan to meet the SDLT deadline would need to wait six months after the purchase to avoid it being classed as a one-day remortgage, Jason responded: “A lot of specialist mortgage lenders don’t buy into that six-month restriction.”  He said that the biggest challenge was assessing whether the cost of the bridging loan outweighs the cost of the stamp duty that would otherwise be paid.  “It’s a case of having a good broker going through all the calculations and actually working out if there’s a real value there  [that warrants] going through that process.”

Imogen added that, with certain lenders, it can sometimes take three to six months to arrange a term mortgage, anyway. 

Chancellor Rishi Sunak also revealed the launch of the mortgage guarantee, offering lenders government assurance when providing 95% mortgages. Jason said that, once finance providers have got their heads around it and it filters through, he is excited to see how this scheme plays out. 

“This 95% support is going to be the step that allows people to trade,”  he said, explaining that it could help with the tart and turn approach to property development . 

Imogen stipulated that this creates a stronger element of certainty around exits. “Certainly, there’s going to be more people in the market for our investors, should their exit be sale.

“In addition, I would hope it would stimulate competition, particularly in the first and second-time buyer market, which will [optimistically] have a positive effect on house prices, all of which will feed into  MFS’s appetite in the market for bridging.” 

Piragash feels that the government’s 95% mortgage guarantee initiative is the biggest gimmick of them all. “I would have much rather seen Help to Buy expanded and maybe allowing private companies to enter and start putting equity in to enable people to afford things going forward,” he remarked. 

For the second half of the discussion, the panellists dissected MFS’s latest quarterly property investment survey, which found that 34% of investors have changed the qualities they look for in a lender as a result of the pandemic.

Mathew thinks that the top three qualities borrowers are now  looking for are certainty, good communication and flexibility. Jason agreed, highlighting that open dialogue was “key”.    

Tiba added that deliverability is also on the list of primary requirements. “Over the past year, something we’ve learnt is that a lot of lenders will say ‘yes’ because they want to do it; they have the flexibility but, along the way, they slightly change the goalposts or they don’t have the money that they think they have,” she explained.  “It’s important to have people that are reliable, know what they’re doing, and understand the bridging market well.” 

Imogen added that, with MFS having eight funding lines, it means that if something crops up during the valuation or legal stage, it can still often get the deal funded. “If you have lenders that are very much tied to their covenants  [with fewer funding lines], it means that they aren’t able to have the same flexibility that we have.” She pointed out that this is important currently, as the health crisis has increased the complexity of everyone’s situation.  

The MFS research also found that some 65% of property investors fear that the pandemic has made banks overly reliant on technology when providing customer service.

Considering there has been an influx of tech and automation in the bridging market in recent times, the panellists were asked whether there is a risk the same thing will happen in the specialist arena. 

Nick brings up the significance of product market fit, and feels that the issue with banks is that the tech they have built doesn’t really serve the customers or the institutions.  He notes that bridging lenders, typically run by younger, more tech-orientated people, “have a better opportunity to build technology that actually works”.   

“As long as bridging lenders are keeping the broker and, ultimately, the borrower, at the centre of the tech they’re trying to build, over-relying on tech can only be a good thing.” 

The full video of the roundtable can be viewed below.

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