Property investors losing over £1m per deal by not comparing lenders

Property investors and developers are losing over £1m in leverage on a single deal by not comparing lenders, according to market research by Brickflow.

The report, titled ‘The UK's Most Expensive Mistakes’, shares the wide range of lending terms on offer across the market and argues that relying on manual loan sourcing can severely restrict cash flow and stall broader property acquisition and project pipelines.

By analysing 300 simulated finance searches across bridging loans, commercial mortgages and development finance, Brickflow compared how different UK lenders responded to identical borrowing scenarios.

On bridging loans, the average net loan difference was £250,000 based on a £1.4m purchase.

Commercial mortgages had a £306,000 gap on a £1.5m purchase, while development finance saw an £842,000 difference on a £3.7m project with a £5.2m GDV.

Development finance saw an £842,000 average net loan difference on a £3.7m project with a £5.2m GDV.

The pattern holds across every product and every asset class analysed.

In bridging, the single lowest gap recorded in the whole dataset was £55,000, while pure residential purchases averaged over £251,000.

For a £1.4m residential purchase in London, the most competitive net loan reached £979,265, while the least competitive dropped to £646,106.

Brickflow said that £333,159 gap meant one lender was prepared to advance 52% more than another against the same asset.

On a £1.5m retail purchase in the North West, net loan offers ranged from £1,125,000 down to £750,000.

The £375,000 difference translates directly into a 50% smaller deposit for the borrower who compared the market.

With a £3.7m residential project at £5.2m GDV in Wales, the most competitive lender advanced £3,371,262 against the least competitive at £2,340,936 — a variance of £1,030,326 on an identical scheme.

That gap indicated 94% higher ROCE for the investor who secured the better terms.

The report also modelled what these gaps mean over time.

On the £3.7m development scenario, the lowest deposit required by any lender was £450,000, while the highest was £1.4m on the same deal.

Starting with equal equity of £1.4m, an investor securing the most competitive terms could spread that capital across three projects, while an investor accepting the least competitive would commit all of it to one.

Repeated over a career, that is the difference between 30 completed projects and 10.

Ian Humphreys, CEO at Brickflow (pictured above), commented: “Looking at a single lender or a handful of lenders is the industry standard for many borrowers and brokers not using technology.

“The reality is that this manual approach is costly.

“Borrowers can tie up hundreds of thousands of pounds in unnecessary equity on every deal by sourcing finance manually.

“If that capital were freed up and reinvested, the additional property transactions completed each year could be substantial.

“Manual loan sourcing is holding brokers and their clients back.”