Dave Fathers is head of sales at Finance 4 Business
Firstly, may I wish all the industry a Happy New Year and a prosperous 2017. It was a welcomed relief to relax and spend time with the family.
As is the norm for this time of year, I drank and ate too much, but thankfully have the dog to assist in walking this off. But bizarrely I must say it is good to be back at my desk, fully recharged and raring to go. This seems to be the consensus, with January already becoming a very busy month.
If 2016 is anything to go by, we are in for a very interesting year. It is a year we are very excited about with many upcoming plans coming to fruition. Many of which will have a positive impact on the bridging team.
On the back of a record year for bridging for both F4B and the market, bridging has evolved and manifested itself as a niche product area, removing the stigma that has plagued the area for years.
I think it is excellent to finally see the short-term lending market being fully appreciated as a serious sector.
Looking ahead, it will be interesting to see if more lenders will enter the regulated market. The additional cost of regulation and compliance may not be beneficial for all.
Especially for the smaller/specialised lenders, as this could eliminate profits and make them uncompetitive. It is common knowledge that the FCA is looking at the non-regulated market, but only time will tell what happens.
Continuing with the competitive market theme, we can offer rates of 0.55% up to 50% loan-to-value for both regulated and non-regulated loans. This rate is provided by one of the new banks, who’s funding channels have altered since becoming a bank. As they can utilise deposits as an additional funding method, they can provide such competitive offerings from a very low cost source and rate of return.
I do see other major lenders in the market applying for banking licences, with Amicus being the standout provider that is already undergoing this process.
If lenders do obtain licences, this could create a fiercer price war than currently experiencing.
This is good for the client, but we must see if this is sustainable in the long-term. I feel there is additional space for the regulated market to expand, as the purposes for the use of regulated loans increases.
On writing this very article, we have just received confirmation of a new rate lower than 0.55%, which is also from one of the new breed of banks.
Bridging for buy-to-let
The tax changes and affordability requirements on buy-to-let properties, is something that is very much publicised. Higher rate tax payers are under more pressure regarding the affordability requirements set by the lender. Many of the lenders have increased and tightened their criteria, much of which has been directed by the FCA.
What I see materialising is the use of bridging to increase the value of the property, then exiting on to a buy-to-let product. The leverage is lower and therefore can potentially meet the affordability criteria.
This has already started to drip through, but can see this increasing with both existing and new clients’. Having already eluded to rates that are on offer for low loan-to-value products, rates of 0.84% at 70% loan-to-value highlights the attractiveness in the higher loan-to-value brackets.
Dangers of forecasting
When it comes to matters of interest rates, inflation, job numbers etc, I am not going to forecast anything. Especially with all the events of 2016.
Predict correctly and you are a market genius, predict incorrectly and you really haven’t got a clue. With so many political events happening throughout the year, it is difficult to confidently state anything.Prime areas of London sales have dried up, but when London is affected, it is often a barometer for the rest of the UK. But with many predictions of last year being incorrect, this could also be the case.
One positive step is individuals having to go through a regulated broker for a regulated bridging loan. We must act on the clients’ best interests, not our own and feel this will eradicate the more unscrupulous brokers that exist. It may seem a logical and normal practice, but having worked in this industry for many years, you would be very surprised.
New lenders, more competitive rates, new funding channels, experienced personnel moving to both existing and new entrants in the market, it is going to be a hotly contested market.
All lenders are going to have to adapt and be more flexible which is great for the leading broker in the UK. We work closely with all lenders, often discussing the trends and the market in general ensuring that we maintain our own competitive edge.