Non-regulated bridging more ‘attractive’ than some fixed rates ‒ Finanze

Speaking to Specialist Lending Solutions, Benjamin Sabih (pictured) head of bridging and development at Finanze said that previously the bridging market had been around 70 per cent non-regulated and 30 per cent regulated but after the stamp duty holiday this flipped to a “complete mirror image”.

He said that it had “come back around now” so non-regulated bridging was more dominant and added that he thought there would be increased demand for investment properties.

Sabih noted that he expected the foreclosure market to grow in the next six to nine months, which could present an opportunity to property investors who could pick up “properties potentially at a discount”.

Commercial turns residential

He added that he was seeing a lot of commercial to residential conversions, which he said was “natural” coming out of the pandemic when people were downsizing their office or commercial spaces.

“I think now obviously councils are granting commercial to resi quite a lot because there is a severe lack of residential properties in UK at the moment,” he explained.

Sabih said that he thought the non-regulated market had remained “pretty consistent” and, in the past few weeks, was starting to look more attractive than some fixed rate mortgages.

He said previously clients would want to exit their bridge at the earliest point to maximise profit, but now they were considering a 12-month facility and then looking at rates for the exit in around six months.

“I think people are happy to sit there and pay five or six per cent over six months and then see what their refinance options are halfway through that.”

Recent figures from Moneyfacts show that the average two-year fixed rate is 6.01 per cent and the average five-year fixed rate is 5.8 per cent.

Lenders have ‘done a good job’

Sabih said that lenders overall had been “pretty reactive and responded quickly to changes in the market”, with most holding rates in the non-regulated bridging space.

“I think they’ve done a good job. A lot of lenders have held their rates as well, which I think has been helpful because, ultimately, if they’re moving their rates up, alongside the term rates as well, sometimes a deal that could have been done originally becomes unfeasible.”

He added that he wanted lenders to “stick with where they are” because whilst bridging may not be the cheapest form of finance it could be a “fantastic purchase vehicle” for certain borrowers.

“I’d like not to see the rates go ridiculously high because bridging used to have a stigma, but it has been increasingly positive over the last five or six years.”

He continued: “If bridging is used within its intended parameters, it is very effective, but there’s not a massive longevity in sitting in the bridge. The whole point of doing it is to break a chain, get a quick purchase across the line, and then ultimately look to a long-term refinance and try to maximize the value of the property.”

New lenders, new ideas

Sabih said that the firm had around 500 lenders that it can approach on the bridging and development finance side, but it was “always great to see” new lenders come into the market as they had “very innovative product ideas”

“In this kind of landscape, you do need a lender to say this is what the market needs right now, so I’m going to bring this product to market.

“We’re definitely in a situation where one size doesn’t fit all. So, I think if lenders can think outside the box and bring something innovative to the market, this will only benefit the borrowers.”

Sabih said that he definitely expected lenders to adjust their products in the coming months, noting that some may be more risk averse to certain acquisitions or lending, such as lending to care homes and hotels.

However, he said that he did not expect them to overhaul criteria but certain loan to values on certain properties could be reduced in the coming months.

Brokers need ‘open line of conversation with lenders’

Sabih said that brokers should make sure that they are refreshed and up to date with criteria and products.

He said that the bridging sector was not changing on a daily basis like the mainstream fixed rate market but it was important to build relationships with lenders.

“If you’ve got relationships with lenders that you know, that have completed transactions for you, which ultimately have led to customer satisfaction and repeat business, speak to them and find out where they are in the markets.”

He said having an “open line of conversation” with a lender would always help a broker know “exactly where you are” and ensure that you can pass “correct and accurate information to your client”.

Finanze ‘always on lookout for people’

Sabih that the firm was “trying to branch out into every sector of lending”, and that it could eventually target protection as it goes “hand-in-hand” with property-based finance

He noted that, at the moment, it was currently just him on bridging and development finance side but that it was always looking at recruiting talented people.

“We grow as the business grows, I would say we are always on the lookout for people to come on board and bring something to the company.”