The Covid-19 pandemic has resulted in two of the most extreme sets of trading conditions that Market Financial Solutions (MFS) has experienced in its 15-year history.
The stamp duty holiday, offering buyers the chance to save up to £15,000 on the tax, saw the property market explode into life. UK average house prices increased by 10.6% over the year to August 2021, according to the Office for National Statistics.
Bridging finance to the fore
However, the sharp uptick in activity has caused many headaches for lenders and property buyers alike over the past 12 months and brokers have, unfortunately, been caught in the middle.
MFS focuses its efforts on taking pressure off the broker
Simply put, the increased demand for loans resulted in either lengthy delays or buyers being turned away — and, for those buyers unable to secure the necessary finance quickly, there was every chance a rival bidder would take their place.
Buyers and investors needing faster alternatives turned to bridging finance in their thousands. Data from the Association of Short-Term Lenders shows that bridging completions totalled £1.1bn in the second quarter (Q2) of 2021, an increase of 23.2% on Q1.
The ability to secure a loan in a matter of days enabled buyers to avoid protracted property chains and press ahead with an acquisition at pace — which was vital in a fiercely competitive market.
Yet the bridging market experienced its own challenges as demand for short-term loans rose rapidly. Many lenders lacked the funding, skilled underwriters or support mechanisms to complete deals; no doubt during the stamp duty holiday many brokers will have seen a lender pull out of a deal it had originally committed to, leaving them and their clients in the lurch.
Bridging lenders adopt a far more flexible approach — taking time to understand the client’s particular financial profile, circumstances and needs
MFS had to take robust action this year to ensure the uptick in demand among brokers could be met with the same speed and level of customer service that we have always prided ourselves on. For instance, we grew our staff number by more than 40% in the first half of 2021 alone, as well as securing multiple new funding lines worth a combined £400m.
Flexibility is key
When considering the strengths of bridging loans, we should not be fixated on speed. The fact that a bridging loan can be delivered in a matter of days is, of course, crucial in meeting the needs of brokers and clients. But flexibility is equally important.
Traditional lenders and high-street banks are typically quite rigid when it comes to applications for mortgages or others forms of finance, and there are many people — or indeed businesses — who cannot satisfy this ‘tick-box’ approach. High-net-worth individuals, overseas buyers or even full-time property investors often struggle to access property finance. Their sources of income are irregular, or their wealth is located in a variety of locations or tied up in a range of assets.
When considering the strengths of bridging loans, we should not be fixated on speed
Brokers working with such clients ought to consider bridging loans. Lenders like MFS adopt a far more flexible approach when assessing a prospective borrower — this involves taking time to understand their particular financial profile, circumstances and needs. A bespoke bridging loan can then be tailored to their exact requirements.
MFS focuses its efforts on taking pressure off the broker. By underwriting loans heavily at the start of the process, and with an ability to handle both large and complex loans, MFS has proven itself as a reliable, trustworthy bridging lender.