With this in mind, Specialist Lending Solutions asked three brokers what they would like to see from new lenders entering the specialist sectors this year.
There’s greater appetite among development finance lenders in the market for loans over £500,000. The gap where there is an issue is under £500,000.
Some people might say above £1m is tricky, but I disagree with that – I’d say over £500,000 there’s more availability that there was 12-18 months ago.
But under £500k for smaller developments or developments in the north, there’s lots of opportunities for lenders to get involved.
I think this year is going to be very big in refurbishment finance too with all the Energy Performance Certificate (EPC) changes.
They will be kicking in soon so people have to refurbish properties and also more landlords are going into houses in multiple occupation (HMOs) with the higher yield.
So I’d like to see more buy-to-let lenders doing more traditional refurbishment finance, like they used to do in the past.
Traditional bridging finance is covering the gap at the moment, albeit at a much higher cost.
More lenders in the refurbishment to let space would be desirable – we’ve had a lot of clients buying properties at auction and then doing them up.
You can do all that with bridging finance, and in different ways too, but I think lenders are starting to think a little bit more outside the box in terms of products.
Your skill as a broker is to put clients with products where they may not have thought of them or there isn’t an existing product – that’s always part of the job.
Where development finance is concerned, there’s an awful lot of players in the space and a lot of similarity. That’s possibly a bit confusing for consumers but we see that as a good market for us this year.
I’ve been in the industry a long time and can’t think of a time when there’s been more lenders doing that, which is a good thing, but also bewildering from the consumers’ point of view.
Development finance is already an active marketplace. Lenders always have a tough job, and one of the hardest things to do is spot the niche.
But there is definitely room for criteria and rate tweaks and to help the smaller size developers with mezzanine funding and so on.
I expect new lenders will play with rates and criteria, because otherwise if they mirror what’s there then brokers will stick with what they’ve got – if you’ve got a very good relationship with a lender you’re not going to jump ship to somebody who just offers the same without knowing what their standards are.
We have to do due diligence on lenders just as much as lenders do due diligence on us. It’s up to us for our clients to make sure lenders do what they say they are going to do.
They need to be able to match the service that the client needs.