Thanks to everyone who has made the effort to correspond with me about the Bridgingwatch column. I hope my co-columnist Danny Waters, chief executive officer of Enterprise Finance, and I can do our bit to take away the myth that short-term finance is dirty or wrong.
With a market approaching £1bn this year it remains one of the few sectors set to grow.
I would like to congratulate a couple of short-term lenders that were successful at the recent Business Moneyfacts Awards. Dragonfly Property Finance retained its award for Best Bridging Finance Provider and United Trust Bank won Best Service from a Bridging Finance Provider.
One area that continues to catch intermediaries out is valuations and the difference between 180-day and 90-day values. Most lenders happily use the traditional 180-day value, whereby the valuation will be undertaken and value given for the property being sold and marketed to achieve a successful completion within a six-month period.
This is the same basis as most residential mortgage lending.
But some lenders use a discounted, 90-day value, which is the property value based on a three-month cycle. Clearly, in virtually all cases there is a significant difference between the 90-day and 180-day values.
Most short-term lenders, even if they elect to use a 180-day value, will keep an eye on the 90-day value and if that is too low they may decide not to fund a deal. This can be frustrating for all parties but particularly for the client who may have paid several thousands of pounds in legal and valuation fees.
Prior to valuation, I would recommend brokers ask the distributor or lender what 90-day value needs to be achieved and inform the client.
Another issue is getting solicitors who aren’t actively involved in bridging to act on clients’ behalf. We have seen a number of aborted transactions where a solicitor hasn’t moved quickly enough, exercising the same expediency as they would in a standard residential mortgage transaction.
If a deal appears to be taking too long the lender is likely to lose interest and move funds to another client. Before I get a load of angry letters, my comments aren’t intended to tar the whole legal profession with the same brush.
It’s good to see some of the bigger bridging lenders pushing to get regulated by the Financial Services Authority which will allow them to do regulated bridges.
While the likes of United Trust Bank, Cheval, Precise Mortgages, Masthaven Bridging Finance and Lancashire Mortgage Corporation do a great job in the regulated arena there aren’t enough lenders doing these type of loans to satisfy the size of the market.
I hope our friends at Canary Wharf take a sensible approach to lenders trying to get regulated as they should be allowed to grow in a compliant way.
On a final note, there has been an interesting development with secured loans over the past month with lenders such as Shawbrook Bank and Nemo going sub-7% with rates.
Think about your clients who are on low reversionary rates and consider a second charge instead of a potentially more expensive remortgage. Both these businesses have some of the best staff in the lending community in my opinion.
United trust bank
Completed a complex £2.3m bridging loan on a portfolio of five London residential properties for an investor restructuring his portfolio.
Completed a deal in just four days. The £270,000 deal involved the borrower purchasing his brother’s interest in a property that had been left to them by their parents. The borrower has been given just one week to complete.
Completed a bridging loan in 48 hours following a request for a sizeable loan from property specialist London and District.
Shawbrook Bank offers a rate as low as 0.71% a month for non-regulated commercial bridges.
Tiuta is offering great deals for loans of up to £30m.
United Trust Bank continues to lead the pack for bridging a new purchase for clients aged over 65 where there is an unencumbered property. Interest is rolled up and rates are among the lowest in the market.
Masthaven Bridging Finance remains strong for purchases below £100,000.
Lancashire Mortgage Corporation will lend on land that doesn’t have planning permission.