The rate is of course important, but there’s more to the job of a broker than simply identifying the lowest rate around.
Time is often of the essence, so a broker wants to find a lender they can rely on, a partner who they know will be able to provide the funds the developer needs, and in a timely fashion.
This can be a lot easier said than done.
The uncertainty of the market at the moment has led a host of lenders to scale back their activities, or pause them entirely, due to concerns over finding the capital for new development lending.
As a result, brokers need to focus not just on the products themselves when deciding on a lender, but also evaluate which lenders they can trust to deliver the money, both at the acquisition or refinance phase and during development.
Diversity of funding
The situation is a big reminder to lenders that it is crucial to concentrate on building a diverse range of funding sources, rather than just one single route.
It’s something that we have put a lot of work into at LendInvest, as it allows us to lend with confidence, knowing that the funds we have promised to a borrower will be there.
Last year we completed a key funding deal with Nomura and Magnetar. There is also our online investment platform, and our fund management team.
It’s a model that makes sense when the market is on the rise, let alone in the current climate of uncertainty caused by Brexit.
Thankfully, despite the peculiarities of the political situation, there is still a lot of confidence from funders when it comes to putting their money into property.
The impact of Brexit
It’s impossible to talk about the year ahead without touching on the impact that Brexit may or may not have.
Even though we are within a couple of weeks of ‘Brexit day’, we still have little idea of whether there will be a withdrawal agreement in place, whether the UK will leave the EU without a deal, or whether there will be an extension to Article 50.
This uncertainty has dragged on for a long time, and it has unquestionably had a real impact on the development world.
For example, recent data from the National House Building Council revealed that housing starts in England last year dropped by 1.1% to just 137,150, far below the levels needed to meet demand.
We have seen first-hand that some developers with terrific projects are hitting the pause button, adopting a wait and see approach precisely because of how uncertain the market is.
While this is understandable, in truth the fundamentals of a quality potential development are no different regardless of our status within Europe.
So long as the fundamentals measure up – from finding the right location, ensuring there is underlying demand as well as a clear exit strategy – then developers need to have the confidence to proceed.
What happens next?
No matter what happens after Brexit day passes, the fact remains that across the UK we do not have enough homes to meet demand.
While some buyers have also held off because of Brexit, there are still plenty who want to secure their next home no matter what the political situation may be.
We need developers to kick on and build those homes, and they need lenders to be able to deliver the finance as and when they call for it.
Brexit may have been the dominant subject up to now, but in 2019 funding – and which lenders can truly provide it – will be a key debate in this market.