Bridging offers raft of opportunities including commercial conversions and HMOs – SLS In Focus

Smith said that brokers should consider bridging as there would be more opportunities in the coming months of cheaper properties coming to market.

He explained: “I think there are opportunities for property developers as there will be cheap property on the market for whatever reason. They [developers] will take advantage of that as they always do in a downturn.”

Smith also pointed to commercial to residential conversions, which he said had been increasing and added that that trend would continue. He added that it did not take a huge amount of money to refurbish certain properties and some properties like hotels were easier to convert into apartments.

Pritchard agreed that commercial to residential conversions were an opportunity and that investors would potentially be looking at houses in multiple occupation (HMO) and multi-unit freehold blocks (MUFB) due to better yields and high demand.

He said that this could be commercial to residential conversion or changing the use class under permitted development rights.

“I think landlords have had a kicking over the past few years but that’s their business. They still will be looking at the yield potential around the country.”

Lewis said that in three or four months’ time there could be more distressed sales and more activity going through estate agents who want to get property on market as quickly as possible.

Therefore, to maximise opportunity brokers should develop relationships with estate agents to see if they can connect clients to such sales.

‘Calculated risk’ of a two-year bridge

Lewis said that two-year bridge was a good opportunity in the current market as in certain circumstances it could offer better value than a fixed buy-to-let product.

He explained that if there was sufficient equity in the property, a two-year bridge at around 10 per cent per annum with no early repayment charge (ERC) could allow customers to “ride out storm for next 10 months” and see where interest rates settle.

This compares to having to a buy-to-let stress rate of seven or eight per cent on a five-year fixed rate with early repayment charges throughout.

Lewis said: “I would personally rather pay 10 per cent, have no ERC and sit there in 12 to 15 months’ time and say I have a buy to let now on a two-year fixed at 5.25 per cent. That is far more palatable.”

He said that this was a “calculated risk” as there was still some uncertainty about this current interest rate environment and where it would end up.

‘Too soon for new lenders’

All the participants agreed that it would be unlikely for new lenders to enter the market at this current time, but that could change in the coming months.

Pritchard said: “I think the mainstays will remain there; I am not comparing it to 2008 in that sense. There will always be new entrants that want to come in to bridging but choose your lender wisely for that entry.

“Choose a lender who know that they are doing, and that they are going to be there in the long-term, will be able to service the loan and help you out along the way.”

Lewis agreed that it was “too soon for lenders to come in in this environment”.

“To come in now whilst there is this rigmarole around pricing and where it needs to be and where it needs to settle it would be foolish to jump in and try and launch a product at this moment in time,” he explained.

Lewis continued that there was “definitely opportunity” in around six to 12 months there may be more people entering the sphere.

Watch the full video [11:15] hosted by Anna Sagar, assistant editor for Specialist Lending Solutions, featuring Gareth Lewis, commercial director at MT Finance, Steve Smith, sales director at Roma Finance and Glenhawk’s director of sales Jamie Pritchard.

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