"This provides a challenge for the bridging market, as this boom might be driven by the pent-up demand as well as the stamp duty holiday."
We spoke to Marios Theophanous, credit manager at London Credit, about currently challenges in the bridging market and what brokers should be aware of when dealing with regulated vs unregulated bridging lenders.
CR: What are London Credit’s main product areas and specialisms?
London Credit is a principal lender with simple procedures and friendly professionals, ready to assist and provide solutions, offering funding for purchases of investment properties and auction purchases, refurbishment and light development, refinancing of existing loans, business cashflow.
London Credit’s combination of extensive funding and a dedicated origination team ensure loans are completed smoothly and on time. Offering speed, flexibility and ability to lend on complex cases, the firm’s criteria is simple. The process is straightforward and easy and there are no hidden costs or small print.
CR: How will the Covid-19 outbreak continue to affect the market and how can lenders and advisers overcome these difficulties?
It is difficult to predict as there is currently a high degree of uncertainty given the continued lockdowns and the winding down of government support schemes like the furlough and the stamp duty holiday. The renewed Brexit uncertainty is also affecting the market.
In terms of the housing market, experts are revisiting their prediction as we are now experiencing a mini boom since reopening. This is despite the various forecasts from estate agents back in April (when the UK was in lockdown and the property market was frozen) that house prices would fall by up to 10% in the short term.
However this provides a challenge for the bridging market, as this boom might be driven by the pent-up demand as well as the stamp duty holiday.
The Covid-19 has also forced changes in some procedures. Virtual property viewings are now more commonly used and auctions are held online. Working from home, or with fewer numbers has caused and is causing delays.
All of the above provide challenges which the lenders and advisers have to face, and digitalisation, flexibility and sensible underwriting are the main drivers to overcome these. We at London Credit are working closely with our associates, monitoring the market and adapting to the new norm.
CR: What should brokers be aware of when dealing with regulated vs unregulated bridging lenders?
Firstly, it is important to understand the difference between regulated and unregulated. A regulated loan is for personal purposes and / or when the security property is owner occupied or is occupied by a related party, or intended to be occupied by the borrower or a related party. These loans are regulated under the FCA which secures an appropriate degree of protection for consumers.
On the other hand, an unregulated loan is a loan to a limited company or a loan to an individual for business purposes. Furthermore, the security property must be a pure investment property (not occupied or intended to be occupied by the borrower or a related person). Commercial borrowers are not protected by the FCA.
In terms of unregulated bridging loans, Brokers should be aware of the above and that there are respected industry bodies like the NACFB and the ASTL in which London Credit is a proud member and follows their code of conduct and professional standards.
CR: What trends do you expect to see within the bridging market in 2021 and beyond?
The most obvious trend already affecting the whole of the market is the move from physical to digital / online. We will most probably see a move of business development from face to face meetings to phone and online meetings. Events like conferences and exhibitions could also be made virtual.
CR: What opportunities and issues do you think SMEs will face in the next twelve months?
The impact, the opportunities and the challenges will be significantly influenced by how the government will respond. There are sectors like local retail and leisure, digital and online trading and entertainment that are expected to gain and sectors like large retail, events, venues, hotels and commercial property especially offices that are expected to lose from the crisis.
During this period most businesses (at least those that can operate away from the office), have been working from home as much as possible which has changed the way businesses operate fundamentally. Remote meetings and day-to-day operations are facilitated by technology and providers of this technological solutions are benefiting of this situation.
Another change in behaviours during this period relates to commuting. Most people are either commuting less, or not at all and this and since people are spending more time locally provides opportunities for small local businesses.
On the other hand, SMEs will face issues with the customers’ behaviour as they may be more cautious with their spending decisions especially with non-essential goods and disruption in the supply chain. These will probably cause cash flow issues
CR: If you could see one headline about the commercial lending market in 2020, what would it be?
'From physical to digital'.