September 2019
Paresh Raja, CEO of Market Financial Solutions
There’s no denying the challenges currently faced by borrowers and brokers seeking to arrange finance for a property acquisition.
The political and economic uncertainty brought on by Brexit has resulted in more lenders adopting a risk averse approach, waiting to see what events the coming months will bring and the impact it will have on the property and financial markets. This means it has become more difficult for prospective borrowers to find a lender willing and able to deploy a loan tailored to the needs of the applicant.
This trend comes at a time when bridging finance has become increasingly popular within the UK real estate industry, with property investors recognising the value of the speed and flexibility with which such loans can be deployed. In the 12 months to July 2019, the Association of Short Term Lenders (ASTL) revealed that bridging loan applications hit a record £22.19 billion – a 9.7% increase in the number of applications received in the previous year.
Now, however, it is important this momentum is not lost as a result of uncertain market conditions. Indeed, bridging lenders like Market Financial Solutions (MFS) have witnessed first-hand the impact of volatile economic periods, such as the global financial crisis, general elections and the current Brexit saga. But by using their experience, established lenders can implement tried and tested application processes to ensure borrowers are able to access finance quickly should they fulfil the necessary criteria.
Interestingly, separate figures from the ASTL in June 2019 showed that while applications are on the rise, completions are down. This poses a significant challenge for borrowers and brokers, who need to sift through the expanding number of specialist finance products available to find lenders best suited to address their nuanced requirements.
How to make your next bridging loan application a success
At MFS, we deal with a wide range of borrowers (and their brokers) who have very particular, special or complex financial circumstances, be it a foreign national seeking to expand their buy-to-let property portfolio in the UK, or a wealthy individual in need of fast finance to renovate, refurbish and eventually sell residential real estate. As a result, we have seen what mistakes some borrowers commonly make.
In the first instance, borrowers can tend to overvalue their property and subsequently hold unrealistic expectations regarding the amount they can borrow against it. Moreover, many do not properly consider their likely exit strategy, at least at the beginning of the application process. That is why it is in the interest of borrowers and the brokers representing them to find lenders that are honest, professional and transparent.
Lenders like MFS take a professional, hands-on approach, ensuring the property being used as a security is properly valued, and a tailored exit strategy is in place, which is suited to the circumstances of the applicant. It is also important for prospective borrowers in difficult financial situations not to be deterred from applying for loans. Bridging loan providers are expertly placed to take on cases most mainstream lenders would turn away. The key is finding the right type of lender; one that is experienced in taking on similar cases.
The UK remains a leading destination for investors – domestic and international – seeking commercial and residential real estate opportunities. Brexit has not yet changed that, despite making conditions more challenging for lenders and borrowers alike. However, as long as due diligence is exercise by all parties, and a transparent approach is adopted when assessing the viability of a loan, then the bridging market looks set to continue its impressive growth in the years ahead.
For more information visit https://www.mfsuk.com/