Liquidity rules as lender look to get money out
Andrew Hosford is director – head of bridging at Voltaire Finance
We have had a manic September and October. From speaking to a large number of industry friends it seem they have as well. Our enquiries are the highest since early 2015 over the last four week period.
The range in deal type is quite dramatic as well. I am working on a second charge equity release bridge for £500k and a £40m mixed use portfolio, both from the same introducer. Of course we have always had a nice variety of deal, but given the sheer volume of deals the extreme variety is very welcome.
We have also had a number of lenders, with whom we have existing relationships, come to us regarding their new credit lines. Three lenders have now received cheaper lines of funds that have increased their cash pots to over the £250m mark. They now need to deploy the cash of course. This excess in liquidity, and the cheaper rates that they are getting the funding for, has a trickle down affect that can only be good for the clients. In short, they can borrow money cheaper.
Another lender that we know has recently stepped into the bridging world. They are not advertising that they are doing bridging, rather than the investment type deals that they have historically. Rather, they are letting a handful of trusted partners know that they can now fund short-term requirements.
They are used to lending long-term money for a rate of circa 3% per annum. The first couple of term sheets we received from them the pricing was around 1%pm. which made a very healthy return, but they were not prepared to gear up higher than 60%. Obviously that place in the market is saturated by a number of speciality bridging lenders.
We informed them of this and they have reacted, in dramatic style. They have now offered terms of 0.5%pm at 67% LTV. Now, the client is excellent as is the asset, these terms would not be available for all deals at 67%. However, given the opportunity for a wider relationship with the client the lender took what I would say is the best part of private banking and mixed it with a bridging attitude.
Along with the Private Bank that is now willing to fund short-term loans, the more traditional bridging lenders have what seems like an ever increasing amount of liquidity. Is this because the UK, despite Brexit, is still seen as a safe place for property lending? Foreign funders are still investing large amounts of money into UK lending vehicles to deploy all over the UK. It’s not just one funder taking a punt, there are numerous players increasing their exposure to the UK property market.
It must still be an attractive place to invest despite the current uncertainty. If, with all the potential pit falls of pulling out of Europe, we are still seen as a safe(ish) bet then the rest of the world must be an extremely interesting place to be lending money.
So after Brexit our deals are up and lenders are complaining of sitting on too much money. They need to deploy it quickly and bridging is seen as the quickest way to do so. The liquidity is there and it seems that the deals are too. We should be set for a very healthy end to 2016 in the short term, specialist finance market.