Pink Pig Loans

Health of the housing market is encouraging lenders to compete on LTV and rate

There is no better indication of the health of the bridging market than the rate at which new lenders have moved into the sector over the last couple of years. It has felt like every month or so, a new name has moved into the short-term loans sector, promising to deliver a better deal to borrowers.

Competition has been fantastic for the bridging sector as a whole, but particularly for those borrowers who make use of bridging loans to boost their investment portfolios. In recent years, the entry of new lenders has pushed rates down, making borrowing through a bridging loan far more cost effective than ever before, while the sheer level of choice on offer has meant that advisers and their clients have had no shortage of options.

Of course, that hasn’t been the case for all borrowers. While competition has focused on rate, there have been certain areas of the market that have remained underserved. However, this is starting to change.  

Bridging lenders have recognised that the race to the bottom on rate can only go so far before the margins on those loans become unappealing, and so, they are looking for different ways to stand out from the competition — such as criteria and, crucially, LTV.

It’s on this latter front that really encouraging changes have been seen recently, with a handful of lenders taking a much more open approach to the sums clients are wanting to access. This may mean going as high as 85% LTV on purchase prices, or even in some cases all the way to 100% LTV when the borrower is looking to add value to the property they are purchasing, for example, through some light refurbishment work.

Confidence in the property market

It’s important to recognise why these lenders feel able to deliver such deals at the moment. Ultimately, it all comes down to their funding lines and how comfortable those funders are with the UK property market.

It’s no secret that the housing sector has performed incredibly well, despite the challenges of the pandemic. The latest data from the Office for National Statistics found that house prices increased by 10.8% over the year to December 2021, reaching an average of £275,000.

The foundations of the market are unchanged, in that demand remains strong despite the ongoing lack of supply. Addressing that housing shortage is not going to happen overnight, so price rises are only likely to continue. And that confidence in housing as a solid, reliable asset makes those funding bridging loans far more comfortable about taking on a little more risk, in the form of higher LTVs or more flexible lending criteria.

Tapping into the experience of specialists

A crucial element to highlight here is the fact that experience makes a huge difference in getting cases across the line with these deals. While some lenders are happy to take a more lenient view towards cases at higher LTVs, higher loan sizes or even both, this isn’t going to be the case across the board. It will only work for them in certain situations, and the way that you present the deal will therefore be of the utmost importance.

That’s where partnering with an experienced packager can make all the difference. For some brokers, bridging deals represent only the occasional transaction, but at Pink Pig, it’s what we do every day of the week, and that sort of hands-on knowledge pays dividends. 

Understanding precisely what lenders are looking for from cases in order to qualify for this type of criteria, and how to package the deal and present it to lenders so that they are inclined to approve the loan, is what sets the best distributors apart.

Working out who to partner with is a big consideration for advisers, but will ensure they can help more clients to access the funding they need to complete their property projects.

Leave a comment