Speaking to Specialist Lending Solutions as part of the Get to Know Your British Specialist Lending Award Winner series, Stephen Watts (pictured), bridging and development finance specialist at Brightstar Group, said the pandemic caused some lenders to withdraw from the market altogether and many restricted their loan criteria, not just loan to value (LTV) but other aspects as well.
He added that heavy refurbishment was an area which experienced a lot of change, with lots of lenders pulling such products.
Watts said: “Ultimately, trying to get builders and materials on site for those sorts of transactions became almost impossible because we were in the midst of a lockdown where nobody could go anywhere and obviously nobody could get materials.
“I think the big thing now is that coming into 2022 is we’re back to all systems go. Lenders are back to where they were pre-pandemic. LTV offerings, rates and things like that are all back to where they were. So, we’ve come through all of it and we’re back into the start of the year now where business is as usual.”
He continued that lenders had a lot more confidence and said “they want to lend”. He also said there was more customer confidence as well.
He added that during the pandemic there was a “lot of uncertainty” from some customers about whether they would be able to afford to get a project completed on time as it was a struggle to get people and material onsite, meaning they might have had to look at a longer term-time.
Watts explained that during the pandemic, the broker placed even more focus on ensuring it was “doing the best thing for the client”, for instance putting a longer-term time on a facility to ensure the lender and client were protected.
He said so far it had not had a single bridging facility run past its term time since the pandemic started.
Permitted development rights an area of growth
A big trend for the year ahead, according to Watts, will be the increased use of permitted development rights for converting commercial property to residential use.
He said there were lots of office spaces that were no longer being used as many employees had transitioned to working from home, so a bigger office space was not as necessary.
He added that commercial to residential conversion products, along with heavy refurbishment bridging facilities, are “now back with a bang” in terms of lending options available and lenders’ appetite for those kinds of transactions.
However, he said: “One of the biggest challenges, ironically, is going to be the clients’ experience of undertaking such projects.
“There’s going to be a demand for these projects to be undertaken, but obviously it’s going to be coming down to the borrower as an individual and their previous experience.
“I think the challenge in those situations is going to be to look at lending options that are happy for clients who aren’t experienced to be able to facilitate their first project and ensuring that they’ve got the right team around them.”
He said lenders would want to ensure that a client could deliver the project on time, so this could be a case where additional time is added to a loan facility to ensure it doesn’t overrun.
He said that as a business Brightstar was looking to “transact more business this year than we’ve ever done”.
Watts added: “There is absolutely nothing at this stage that is standing in the way of that happening.
“If it does come to it, we will weather the changes as every business does and will continue to thrive in what I believe is going to be really, really strong year.”
Use of AVMs has improved but ‘room for improvement’
He added that one of the “biggest improvements” had been the use of automatic valuation model (AVM) valuations by more specialist lenders, which has meant business has been able to be transacted a lot faster.
Watts continued: “I would say, if anything, there is probably still a little bit of room for improvement, perhaps lenders stretching criteria in terms of the level of percentage loan to value (LTV) that they will utilise an AVM as an example.
“I think that’s probably going to be the major thing is getting to those AVMs becoming a regularly used thing within the bridging industry and it’s already becoming that way anyway.”
Technology is an ‘integration’ not a ‘replacement’
Watts said using video platforms like Zoom or Microsoft Teams had been a “huge benefit” to the business as it allowed it to communicate better internally, but also enabled it to maintain client relationships.
Watts explained: “To be able to maintain those client relationships, do face-to-face fact find calls allowed you to get a real feel for a client and understand them as opposed to just doing it over the phone. That video technology has been absolutely wonderful.”
He added that lender portals, solicitor portals and video walkthroughs of properties from estate agencies were a “big help”. This was especially the case for video walkthroughs during the height of the pandemic when valuers couldn’t go to properties.
He added that the technology meant he was doing more meetings in the space of the day, and this meant the volume of business Brightstar was doing had increased as a result.
Watts said the use of technology had been more of an “integration” and had “not been a replacement in any way, shape or form”, especially in the specialist lending market.
He said: “Underwriting and all of those sorts of things still have to be done by that human element, but the technology-side of things has been able to provide an assist to that.”
