"There has been no huge fall in enquiry rates for short-term finance over this period and demand is rising on a daily basis."
Lockdown began on Monday 23 March when Prime Minister Boris Johnson told the country: “From this evening I must give the British people a very simple instruction - you must stay at home.” This announcement obviously triggered a host of actions across all markets but let’s focus on the short-term finance sector and chart some of the twists and turns over the past 12 weeks.
Pre-Covid-19, the short-term finance sector was in rude health. Activity levels were higher than anytime over the past three to four years and 2020 was set to be a bumper year. Until – like all areas of the mortgage market – the well-publicised brakes were firmly applied.
Did lenders overreact slightly? In hindsight this may well be the case in some circumstances. However, this was the kind of crisis which posed new questions of all businesses. As such, it’s difficult to level too much criticism at the lending community for their reaction to a scenario which none of us have ever previously faced.
I’m not sure that panic is the right word, but the sheer speed of change certainly shook the industry and left us all reeling. Rather than facing pure liquidity issues of times gone by, we were hit by a string of concerns and hurdles around the supply chain. And with the market changing on a daily, sometimes hourly basis, trading became a tougher task for us all – although business was still out there.
Here at First 4 Bridging, we’ve had to pick up the pieces from a number of cases where introducers approached us after their client had been left in limbo by the original lenders. There also continued to be cases, even in the first few weeks of lockdown, where clients and introducers were looking to complete transactions despite how quickly conditions were changing. Thankfully, a number of proactive flexible lenders who remained active were willing to step up to the plate and service the types of deals which could easily have resulted in huge cost implications for the borrower in question, through no fault of their own.
Many short-term lenders have also been flexible in extending facilities for borrowers who have struggled to complete a suitable exit over this period. A robust exit strategy is something which has always been important in any well-packaged transaction and specialist distributors are now working closer than ever with providers to help ensure responsible lending practices are maintained and plans are in place for sale or refinancing purposes.
The past few weeks have also served to solidify many relationships and highlight gaps in others. This is something which we have been monitoring closely, and will continue to do so.
Where are we now?
The vast majority of firms have adapted well to new working conditions and there are now fewer excuses from an operational perspective across the industry. However, due to a still largely unknown UK and global economic fallout, some nervousness is evident amongst consumers and lenders.
On a more positive note, there has been no huge fall in enquiry rates for short-term finance over this period and demand is rising on a daily basis. More lenders are returning to the market with revamped product lines and customised lending, with some even looking to be a little more aggressive on the LTV front.
In terms of opportunity, these are likely to stem from the purchase market and we are seeing strong demand from experienced property investors and developers who are taking a view that they can capitalise on some current indifference around the UK property market. So, for those operating in and around bridging and development finance there is certainly room for plenty of optimism and opportunity moving forward. And let me just reaffirm that specialist distributors are better positioned than ever to support intermediaries and their clients on this journey.