Marshall (pictured) raises the point while discussing the wider UK economy and prospects for the year ahead, noting that in general the housing market is in a pretty good position at present.
“While interest rates are so low, the biggest risk we face is inflation rising for a variety of reasons including new tariffs and delays at customs on imported goods, limited supplies due to Covid, increased consumer demand for those imported goods and couple that with a likely surge in demand as the UK starts to re-open after lockdown,” he says.
“So, if the Bank of England then starts to push interest rates up as a way of controlling inflation, this could reduce buyer confidence while at the same time increasing supply from vendors needing to sell because they cannot afford their mortgages. Add to that, the fact that courts have reopened for repossessions, we would see lower property prices.
“But while rates continue to be below one per cent we can all look forward to a strong positive future,” he adds.
‘Never seen so much liquidity’
That largely rosy future is a pleasant surprise to many, Marshall added, one year on from the first lockdown and complete closure of the housing market.
And that is being reflected in the availability of funding in general and for property investment specifically.
“I don’t think I’ve ever seen so much liquidity in the market,” Marshall continues.
“This time last year everybody was staring into the abyss not knowing what it was going to look like. We continued lending in April to existing customers but paused to new customers for obvious reasons.
“What we’ve seen since October, particularly with the government releasing so much money into the liquidity markets, is that money needs to find a home.
“So people are looking for good businesses to get involved with – and there’s a number of those in this space – and as a result I’ve never seen so much liquidity as now.”
Indeed, after being one of the first specialist lenders to return to the market in May, Roma has since been adding to its funding lines, widening its product range, and investing in technology.
The lender was quick to embrace automated valuation models (AVMs) to help it get through the first months of the pandemic and unsurprisingly has continued to invest in this space, with more developments to come.
“We’ve got some very exciting developments that we’re working on with AVMs so watch this space,” says Marshall when asked how far the use of these models can go.
“In terms of where customers are building, refurbishing, renovating or changing a property’s use I can’t ever see an AVM replacing an in-person valuation.
“But I can see AVMs becoming a lot more prevalent in straight forward residential vanilla property and that’s where we’re going to see a great deal of innovation over the next few years.”
He does have some words of caution though, impressing the need for understanding the data being used and ensuring its integrity.
“You have to be careful how AVMs are used, because if they’re used in the wrong way they can expose a lender to unnecessary risk, but used in the right way on the right properties they can be incredibly powerful,” he adds.
New products, wider distribution
One of the most notable trends in the specialist lending market over the last year has been some lenders taking a step back to take stock of their situation.
Meanwhile others have come forward looking to grow their business in either new markets or increasing lending in current ones – Roma has clearly targeted both.
“At the moment we are probably somewhere in the top ten or possibly top 15 in the bridging market in terms of the volume of business we are writing,” says Marshall.
“We feel we can be in the top six within two or three years, such is the quality of people in the business and way we underwrite, and we’ve got ambitions to become a very big business.”
Marshall notes that the development finance offering has been growing rapidly, but highlights the bridge-to-term product as being critical to the lender’s evolution in retaining clients.
“A lot of our customers have got a build or refurbish-to-rent strategy, we spend an awful lot of time underwriting those customers and then we take the majority of the risk,” he says.
“Whereas the buy-to-let lender doing the bridging exit will have the longer-term relationship with the customer once that customer has created value out of that property.
“We wanted to find a way we could retain our customers by offering longer-term products as an exit for a bridging loan and that also means the customer can enter a bridging loan with us, safe in the knowledge they can exit it on completion of the project.”
And it appears the results have been what Marshall was aiming for: “We’ve now got customers on their 15th or 16th transaction with us,” he adds.
Smoothing the broker journey
Marshall’s final takeaway on the market is that technological innovation is only going to continue moving further into the process.
Lenders are becoming more sophisticated, using technology to better understand customers and vastly improving their service.
“Looking at the firms I admire, and there’s lots that I do admire, they are the ones focused on making the broker and customer journey as easy and simple as possible.
“That’s the journey we have been on and will be doing a lot more of that over next two-to-three years.
“We’re trying to grow our business materially without materially increasing the numbers of people we employ by focusing on making that customer and broker journey as smooth as possible,” he concludes.