The stigma surrounding lending in Northern Ireland is deep-seated within the finance community and the reluctance to lend in this region often poses a significant obstacle to brokers looking to obtain finance for their clients in this location.

B&C has endeavoured to unearth those lenders who are willing to issue loans in Northern Ireland and in the process of doing so, has found that many of those who once lent in Northern Ireland no longer do so and those who lend here ‘in principal’ only do so on a very strict case-by-case basis.

Stringent loan criterion is essential where the property market remains stagnant but there is a danger that a lack of liquidity here may worsen the situation, with prospective clients unable to access the diverse product ranges on offer to those in England.

It is therefore important that the issue with Northern Ireland is sufficiently investigated and the perceived issues thoroughly explained in order to stimulate lending in this region and in turn break the liquidity-reluctance stalemate.

What’s the issue with crossing the water?

Lenders currently offering bridging finance in England ventured a number of possible reasons why this aversion to financing deals in Northern Ireland exists. They ranged from geographical distance and lack of specialist knowledge all the way through to Land Registry issues and even persistent political problems preventing a healthy growth in property values.

This, coupled with a small population and a misguided perception that the property litigation process operates differently here compared to the rest of the UK, has led to an overall reluctance to lend in this region.

In an attempt to get to the bottom of this ever-present broker barrier we spoke to David Fine, Business Development Manager at White Rose Finance Group, a lender that issued funds in Northern Ireland before the last recession. He explained these misguided beliefs in more detail: “One of the major drawbacks is a perception that providing loans secured against property in Scotland or Northern Ireland works in a different way to that in England. Scottish property law is different, but paradoxically it is easier to source funding there than in Northern Ireland - which runs a similar system to the mainland.  

“Short-term lenders geographically restrict their funds to those areas they are more familiar with and have control over. These tend to be the South/ South East with a lower appetite for lending in those property locations perceived as having a lower value and less stable housing market. 

"Private investors will occasionally fund loans in Northern Ireland, whilst established lenders in the UK may be reluctant. Private investors are able to keep a close eye on the properties in their geographical reach. There is a large demand for bridging finance in England so very little incentive to diversify locations."

These geographical concerns were also echoed by Simon Ismail of Goldentree Financial Services Plc, a former Northern Ireland lender, who said they no longer lend in this region purely because of their distance from the properties.

David Fine further explained that he knows of no lenders that are currently providing finance here. He even noted the reluctance of some banks, sentiments which might have influenced the majority of the lending community. He added: “After Mathon Finance, a predominant lender in Northern Ireland, closed their loan book other lenders followed suit and withdrew from this region."

One of the larger lenders offering funding here – Northern Bank – told us that although they currently offer bridging finance here, they will only offer the deal directly to client rather than through brokers. 

What are the requirements?

Fortunately, there are still some lenders, although very few and far between, who continue to do business here, despite such negative associations. We spoke to James Wyllie, Director at Montpelier Private Finance Ltd, at specialist brokerage for high net worth individuals, who gave us an insight into how these deals operate:

“We work with two principal funders who lend on residential security in Northern Ireland but with a lower LTV than in England, Scotland and Wales as the property market is much less buoyant than on the mainland.”

He observed a huge demand for bridging in Northern Ireland and told us that Montpellier has received a large number of enquires for funding. He said: “The minimum amount we see lent here is around £50,000 gross and the key to securing funding is the strength of the exit as is commonplace whether Northern Ireland or mainland Great Britain.

“Bridging loans in Northern Ireland tend to be for residential purposes; there are no active bridging lenders that we are aware of who will fund development projects here due to uncertainty in property demand.”

Montpellier gave us exclusive access to a Q&A conducted with a lender who currently provides finance in Northern Ireland, giving us insight into the kinds of deal that will be considered here:

1. Minimum gross loan is £50k already established but what is the maximum you'd feel comfortable with offering for the 'right deal'?

£1m – maximum 50 per cent LTV (90 day)

2. What asset types would be considered?

- Solely residential or commercial too? both

- Flats and houses or just the latter? both (no council)

- If commercial is acceptable, what asset classes? only shops or offices, no industrial or working farms

3. What locations would be considered? Anywhere in N.I subject to meeting the rest of your criteria or within a certain distance of Belfast and/or other named locations?

- most areas but subject to valuer’s comments

4. What exit routes would you feel comfortable with?

Refinance or guaranteed sale of property.  I would need to see evidence.

5. Would you consider a client with adverse credit when lending against N.I property?

Yes we would consider. If any outstanding CCJs, we will insist that these are cleared from the bridge in advance.

And so, it is clear that there is a demand in Northern Ireland for bridging finance but lenders do have a much more stringent criterion than in other, more stable, property locations in the UK.

One issue this investigation has highlighted is the ‘trendsetting’ nature of lenders of the bridging industry, with a reluctance to lend displayed by one financier leading to others following suit. This suggests there is a perception, rather than a factual concern, that there is very little demand for property in this region, contributing to the lack of liquidity. Yet despite these concerns, there is a niche lending market here which, if tactfully taken advantage of, could prove very fruitful.

We spoke to Andrew Fraser, Principal at Stormont Capital, a lender in this region, who explained that Northern Ireland still attracts large volumes of business from English lenders. He said: “80 per cent of mortgages in Northern Ireland still come from English lenders as mainstream Irish banks are often slow to get deals done. Nevertheless, this is one of the main reasons Stormont Capital was set up – to fill a funding void where some English lenders will not provide finance.”

However, Andrew did leave us with a lasting word of warning to brokers looking to obtain finance in this region, reconfirming the sentiment that knowledge is king:  “Bridging in Northern Ireland can be described as ‘lending for grown-ups’ because the lender and borrower need to be fully aware of what they are getting themselves into. A good knowledge and awareness of the property market needs to be the driving force behind the deal.”

By Alexandra Jones