Rise in specialist finance expected post-covid 19

A rise in specialist and non-bank finance is expected in the UK following the end of coronavirus, the market reports. Mortgages lenders and banks have agreed to uphold any existing mortgage offers for a period of up to 3 months since coronavirus lockdown started in March 2020, but a tougher and more restrictive lending criteria […] ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Rise in specialist finance expected post-covid 19 | LandlordZONE.

Rise in specialist finance expected post-covid 19

A rise in specialist and non-bank finance is expected in the UK following the end of coronavirus, the market reports.

Mortgages lenders and banks have agreed to uphold any existing mortgage offers for a period of up to 3 months since coronavirus lockdown started in March 2020, but a tougher and more restrictive lending criteria is expected to follow.

For mortgage lenders, there are many concerns surrounding income and affordability of households, businesses and mortgage applicants, who may experience uncertainty in their income and employment in coming months. This will result in a smaller number of successful mortgage applications and force individuals and businesses to look elsewhere.

Businesses and individuals are expected to turn to alternative methods of bank finance, known as non-bank finance or specialist finance. This includes landlords looking to purchase homes or flats for buy-to-let, commercial property owners who are currently facing the unknown, homeowners looking to move home or investors looking to buy and develop properties.

Specialist finance includes products such as bridging loans, development finance and mezzanine finance -which are commonly used by borrowers looking to avoid property chains, lengthy mortgages and those completing under a short timeframe. Since 2011, the bridging industry alone has grown from £1 billion lent out, to £7 billion in 2019 and it has become a viable way to fund property developments.

Specialist finance companies are currently very limited in terms of funding projects, especially given the covid-19 restrictions that not only the limited demand, but also the ability to carry out surveys, construction work and property auctions.

However, there is expected to be a potential surge in interest and deal activity when the coronavirus lockdown ends, which should confidently be by Q4 of 2020, provided there is no second wave of infections.

Specialist finance can be available in the form of regulated or unregulated activity, but is always secured against some form of asset, usually a residential or commercial property. This source of funding is rarely able to provide 100% of funds, with bridging offering up to 70% LTV and mezzanine in the region of 80% to 90%.

In a business setting, bridging loans can be used as a way to bail out a failing company. Currently the Government of Indonesia is looking at a bridging loan of $500 million to bail out their national airline Garuda. Previously, the German Government had bailed out one of its national airlines Condor for a sum of $415 million.

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Rise in specialist finance expected post-covid 19 | LandlordZONE.

Source : Landlord Zone More   

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Bridging lenders excited about future lending prospects

Bridging lenders and their intermediaries are feeling positive, following the easing of recent restrictions due to covid-19 The specialist finance industry has been hit hard in recent weeks and bridging lenders have had to halt any new business during the coronavirus lockdown. With over 50 bridging lenders and hundreds of intermediaries, the industry has seen […] ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Bridging lenders excited about future lending prospects | LandlordZONE.

Bridging lenders excited about future lending prospects

Bridging lenders and their intermediaries are feeling positive, following the easing of recent restrictions due to covid-19

The specialist finance industry has been hit hard in recent weeks and bridging lenders have had to halt any new business during the coronavirus lockdown. With over 50 bridging lenders and hundreds of intermediaries, the industry has seen very slow growth with hundreds of staff been put on furlough and a limited funding due to no construction work, surveys or auctions taking place.

However, with restrictions easing, the thousands of households and property developers that use bridging finance each year will be able to start purchasing properties and getting their businesses back on track.

“It has been a testing time for the bridging industry,” explains Dan Kettle of Octagon Capital. “Our products are often used as a quick way to buy properties and avoid mortgage chains, but the lockdown has meant that almost all deals were put on hold and we could not acquire any new business.”

“However, with restrictions easing, we are in a good position to resume funding again. Many people and investors will be excited to start building and buying property again and with mortgage lending even tighter than before, we could see positive growth and a good Q4.”

During the 10-week lockdown period, bridging providers were on tenterhooks over whether they could offer mortgage holidays to their customers and what the terms would be surrounding their agreements. Bridging finance is often used for a maximum of 24 months, but with so many construction jobs halted, the chance of these running their course could lead to the deals expiring and challenges for customers in terms of repossession or refinancing.

Nicholas Wallwork of the Property Forum explained: “The vast majority of building sites have come to a standstill. As a consequence, those working against tight bridging loan finance repayment dates will struggle. The property/project, if work does not restart very soon, would likely be worth nowhere near their target value. As a consequence, they would not be able to raise as much traditional finance as expected which would usually be used to pay off the bridging loan. Indeed, when you also factor in the potential reduction in property prices on the whole there could be a huge shortfall.”

However, with restrictions easing and the Prime Minister looking to open all non-essential retail by 15th June, there is more confidence in the specialist finance and bridging industry and many will be delighted to hear this news.

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Bridging lenders excited about future lending prospects | LandlordZONE.

Source : Landlord Zone More   

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