Do you see the upcoming changes to buy to let taxation affecting the bridging finance market?
Absolutely. Landlords with less than 15 properties will have to re-think their short and longer term strategies for residential investment planning. To make sure their portfolios remain profitable they’ll be looking at the yields on each property, but hopefully for tenants there’s not too big an increase in rent. Landlords can also look to move their properties into a limited company to minimise tax, although the cost of borrowing is currently higher and availability of funds is more restricted to limited companies
As the stamp duty deadline looms for buy to let and second homes, we’ve seen a surge in cases for quick completions as landlords want to build their portfolios before April. Although this has been good for us in the short term, I’m confident in the longer term bridging finance will remain strong for renovations and property conversions.
What do you see as the key areas of growth in specialist lending?
Clearly the development finance market will grow as plots of land are made available for new housing. And I mean not just the big residential schemes. I believe there’s a good market for introducers and lenders to help the smaller builder with more bespoke schemes as brown field sites near town centres with good transport links find their way on to the market. Niche lending for niche developers, if you like. But also there are opportunities with permitted development, re-bridging a loan from another lender to give borrowers more time to complete their project and filling in the lending gaps when traditional lenders are taking too long or before longer term finance is arranged.
Will the bridging finance sector continue to grow in 2016?
For bridging finance, I see the market at least retaining its current business levels. Lenders are being more innovative with their products and there is definitely more liquidity in the market. The uses for bridging finance continue to grow and these will prop up the decline in other areas such as buy to let. For example, we’ve completed on a number of ‘permitted development’ cases recently since planning laws were changed for offices to be more easily converted to residential use, and we’ve seen local councils and London Boroughs be more relaxed with planning permissions for borrowers change of use and conversion projects. So the remainder of 2016 looks positive.
There are many bridging lenders out there. What differentiates them for introducers?
I think there are three main differentiators – service, expertise and speed, and they’re all linked. You can only offer great service if you have the expertise in specialist lending; and you can offer only speed if you can offer great service by not only having a good team but also a trusted network of valuers and solicitors who are motivated to progress a case quickly.
Obviously products are important too, but it’s not all about rate. In development and bridging lending it can be about taking a commercial view on a borrower’s credit profile or the viability of a project after completion and not just looking at the state of the property at the outset. At Roma we always meet and talk to the borrowers to get a full understanding of the case, to better assess if we can help them. It’s all part of the service!
If you hadn’t pursued a career in financial services, what would you be doing?
Even though I have an engineering degree, I’ve always wanted to start my own business, so I think I’d have ended up working for myself in some way or other. Property has always appealed to me, so maybe I’d have tried my hand at refurbishing properties to sell on for a profit and built a business that way.
