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Working at speed to deliver a healthy market

The rate of change in the short-term lending market since March has been immense, but one of the great things about our sector is that it is possibly the most resilient and adaptable area secured lending.

Lenders have been incredibly quick to respond to the changing environment and evolve their processes accordingly and while some lenders have pulled back from the market, many have continued to lend throughout lockdown, using technology and remote valuations to continue to operate effectively. They are, rightly, taking appropriate precautions to mitigate risk, and we have seen a tightening of some criteria, such as limiting LTVs, reduced appetite for larger loan sizes and taking a more cautious approach to ground-up developments.
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Moving on from a mortgage payment holiday

If something appears too good to be true, it probably is – and this adage is ringing true for some of the huge number of customers who chose to defer the payments on their mortgage as part of the payment holiday scheme that was announced by the government in March. It was never a payment holiday – merely a deferral – but there are other downsides for borrowers who have taken up the offer, and these are now rapidly becoming apparent.

According to a recent poll by Mortgage Solutions, nearly four in 10 (39%) brokers said that they couldn’t place a case as a result of their client having taken a mortgage payment holiday or having accessed a government support scheme. Read more

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Trends to watch for in the ‘New Normal’

One of the lessons we have all learned from the COVID-19 pandemic is that the world is an unpredictable place in which nothing is certain. As the lockdown restrictions slowly start to be relaxed, nobody knows what shape the economic recovery might take. But we can anticipate future trends based on some of the many changes that have happened during the lockdown.

I spoke to some members of the ASTL Executive Committee to find out their thoughts on the impact of COVID-19 and some of the trends we might expect to see in the future. The key themes were the resilience of the sector, the importance of technology and the opportunities for residential development in areas that have traditionally been dominated by commercial space.
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Reputation will be paramount as we emerge from this pandemic

In April, the international professional services firm, EY published its annual report into the UK bridging market. The research for the report was carried out earlier in the year, before the scale of the COVID-19 crisis was fully realised and, while this has dated some of the results, there are many elements that remain true in the current environment and are likely to continue to do so as we emerge from this pandemic.

One, particularly interesting section of the report, that I would like to focus on, looked at the key customer considerations in choosing a bridging lender. According to the research, 58% of respondents cited “speed of execution” as very important for a customer when choosing a bridging lender, which is consistent with the results of the previous year’s survey.
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Bridging loan books grow by nearly 20% in 2019

Bridging loan books grew to £4.5billion in 2019, an increase of 19.7% compared to 2018.

This is according to figures compiled by auditors from data provided by members of the Association of Short-Term Lenders (ASTL), which confirmed that completions in Q4 2019 reached £1.068 billion – an increase of 13.7% on Q3, while average LTVs continued to remain below 60%.

However, applications in the final quarter of 2019 fell by 10.7% on the record-breaking previous quarter.
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Looking to opportunities beyond the uncertainty

One of the defining comments about the current situation has come from Chancellor of the Exchequer, Rishi Sunak, who said during one of his statements:

“When this is over, and it will be over, we want to look back at this moment and remember the many small acts of kindness done by us and to us. We want to look back this time and remember how we thought first of others and acted with decency. We want to look back on this time and remember how, in the face of a generation-defining moment, we undertook a collective national effort – and we stood together.”
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Bridging is primed to bounce back

What a difference a month can make. I am writing this at the beginning of April, with the UK in lockdown and the global economy in the grip of COVID 19. Just a month previously, we knew that Coronavirus was something to be taken seriously, but we had no expectation of what a crippling impact it would have in such a short period.

At the ASTL we undertook our regular quarterly members sentiment survey shortly after the Budget on 11 March. At the time, the Bank of England cut the Base Rate to 0.5% on the morning of the Budget and the headline announcements from the Chancellor all related to the steps the government was taking to help people through the pandemic. It was unsurprising therefore that the sentiment survey recognised the potential disruptive threat posed by Coronavirus. When asked whether they were concerned whether the Coronavirus outbreak would affect their business negatively, 67% of respondents said that they were.
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The role of packagers in the bridging market

Given my involvement in both specialist distribution and the Association of Short Term Lenders, I was perhaps an obvious candidate to comment on the role of packagers in the bridging market – if only to see how I’d approach it!

To begin with, I would suggest that what is good for the growth and development of the bridging market is also good for packagers as short term lending is rapidly becoming an important element of the specialist lending sector.

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Solutions will be welcome. Once this crisis is over, which of your clients could benefit from bridging finance to help get their plans back on track?

A defining comment on the coronavirus crisis came from chancellor of the exchequer Rishi Sunak, who in a recent statement said: “When this is over, and it will be over, we want to look back at this moment and remember the many small acts of kindness done by us and to us.

“We want to look back… and remember how, in the face of a generation-defining moment, we undertook a collective national effort – and we stood together.”

These are important principles during this very challenging period. But eventually it will pass. When it does, which of your clients could benefit from bridging finance to help get their plans back on track?
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ASTL issues guidance for bridging customers

The bridging market continues to be open for business, with lenders finding innovative ways to keep lending, as well as working individually with existing customers to identify the most appropriate options for their loans, according to a statement by the ASTL.

Vic Jannels, CEO of the ASTL, says: “It’s at times like these when the resilience and innovation of the short-term lending sector comes to the fore. We have seen lenders introducing new technology and processes to ensure they are able to continue to deliver vital funds for customers, and even received new membership enquiries for the ASTL.
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