UK Property Investors Remain Positive Despite Uncertainty

A majority of UK property professionals are set to expand their portfolios in 2019, remaining resilient despite a backdrop of uncertainty and squeeze on affordability.

We polled property professionals as part of our research into the future performance of the UK property sector. 80% of investors said they plan to increase their portfolios in 2019, while 20% said they are not making any changes to their portfolio in 2019. Nobody questioned planned to reduce their exposure to the UK property market this year.

 

Of the 80% looking to expand their portfolios, 39% are looking to buy in the South East of England. 25% said Wales, followed by 13% who said the Midlands. Whilst 16% revealed that would not be buying property in the UK.

No respondents said they were looking to buy in London, as investors look to broaden their portfolios outside of the more expensive Capital.

The latest forward-looking results are encouraging especially as 51% of respondents revealed they are uncertain of the conditions for property investors in 2019. 28% believe conditions will not improve in the coming year.

2018 was another challenging year for property investors in the UK, as Brexit negations continued and finances were squeezed by tax changes. When asked what the biggest challenge for property investors had been last year, the majority (40%) of respondents cited affordability. Ongoing Brexit uncertainty was the second biggest challenge at 32%, followed by accessing funding at 17%. Some 11% said Government legislation was the biggest challenge in 2018.

During 2018, 48 of the 101 respondents revealed they had purchased residential properties as investments and 43 respondents had bought commercial properties. 21 said they bought foreign properties as investments. Whilst the majority (50 respondents) said they didn’t purchase any property in 2018.

 

The UK property market has seen a reduction in high-value purchase transactions. This is reflected in the latest data from HMRC, who revealed stamp duty receipts fell by £1 billion last year.

The results from our Q4 Property Investor Survey highlight how higher stamp duty and a lack of affordability has pushed property investors out of London, where more rental properties are vital. While there is continuing uncertainty, particularly over how the Brexit negotiations will unfold, UK property investors remain resilient. The fact that property professionals have revealed they will continue to invest in the UK, despite the uncertainty and numerous challenges, bodes well for the future of the market.

To find out more, speak a member of our team on 0203 475 0176 or click here to fill out our quick enquiry form.

2018 Bridging Trends revealed

Despite the turbulence in the financial markets, bridging finance displayed positive development in 2018 and maintained favourable liquidity, particularly in the second half of the year, according to the latest Bridging Trends data.

Bridging loan volume transacted by contributors hit £766.9 million in 2018, an increase of £232.8 million on the previous year. This is the highest annual gross lending figure to date and comes as four new contributors joined Bridging Trends in 2018: Clever Lending, Complete FS, Pure Commercial Finance, and Y3S.

The split between 1st and 2nd legal charge bridging loans remained consistent throughout 2018, with first charge loans accounting for 83% of the market in all four quarters. Second charges accounted for an average of 17% of total market volume in 2018 – the same average volume as in 2017. In 2016, 18% of bridging loans transacted by contributors were second charges.

A significant portion of bridging loan activity was unregulated in 2018, at an average of 64% of all transactions. Whilst regulated bridging loans decreased market share on previous years to an average of 36% in 2018, compared to 46% in 2017, 44% in 2016, and 37% in 2015.

Average loan-to-value levels increased in 2018 to an average of 55%, from 47% in 2017, and 49% in 2016. This could be attributed to higher LTVs being made available by new entrants in the space.

Average monthly interest rates continue to fall year on year, demonstrating how bridging finance has become cheaper. The average monthly interest rate in 2018 was 0.81%, lower than in 2017 (0.83%) and 2016 (0.85%).

Funding property refurbishments was the most popular reason for obtaining bridging finance in 2018, with the average proportion of loans advanced for property refurbishments increasing from 23% in 2017, to 28% in 2018.

Demand for bridging loans taken out for business purposes also increased in 2018, increasing on average from 12% in 2017, to 14% in 2018.

2018 was evidently a year where borrowers decided to opt for fast and flexible bridging loans to make improvements to properties and bolster yields, against the backdrop of Brexit uncertainty and legislation that has made it tougher to purchase new properties. Consequently, bridging loans for mortgage delays fell in every quarter in 2018.

The average loan term in 2018 was 11 months. down from 12 months in 2017. The average completion time of a bridging finance application averaged 45 days in 2018, up from 43 days in 2017. Average loan completion times were also 45 days for the year in 2016.

To view the Bridging Trends 2018 infographic, please visit www.bridgingtrends.com

bridging-trends-2018

Brokers confident for 2019

A majority of brokers are confident about the year ahead, according to our latest Broker Sentiment Survey with 42% of brokers predicting an improvement in market conditions in 2019.

Some 37% of the 113 brokers questioned believe overall market conditions will remain the same in 2019, whilst only 21% of brokers surveyed said market conditions would get worse this year. Almost three quarters (71%) of brokers surveyed said the impact of Brexit would be the main challenge for UK financial services firms in 2019, while 17% cited economic uncertainty, and 4% said lending restrictions would be the biggest challenge.

Despite these challenges, demand for specialist finance is expected to remain strong, with 82% of brokers preparing for a further rise in bridging finance volume in 2019.

In addition, 75% of those questioned reported an actual rise in bridging loan volume in 2018.

For the fourth consecutive quarter, funding a development project was the main reason borrowers took out bridging loans in the last quarter of 2018 at 33%, followed by property purchases at 29%. Whilst 13% of brokers said refurbishment was the most popular purpose for bridging finance in Q4 2018.

For the sixth consecutive quarter, the South East saw the biggest demand for bridging finance in the UK during the fourth quarter of 2018, at 54% — a 7% increase on Q3 2018.

The second highest area of demand was in the Midlands. Only 12% of brokers noted demand for bridging finance in London, down from 41% in the previous quarter.

To find out more, speak a member of our team on 0203 475 0176 or click here to fill out our quick enquiry form.

Property investors still optimistic despite Brexit negotiations

The ongoing Brexit negotiations have left the UK property market in a state of insecurity. This is reflected in the results from our latest Property Investor Survey, where almost half (43%) of respondents stated that the biggest challenge they currently face is the continued uncertainty surrounding Brexit. This is currently seen as a bigger challenge than lending restrictions at 28% and the recent changes to buy-to-let (BTL) legislation at 16%.

The standoff in the Brexit negotiations alongside the Bank of England Governor Mark Carney’s warning that property prices might drop by up to a third after a ‘no deal’ Brexit, has meant that property investors are being faced with the question of how Brexit might affect them.

With a reduction of tax relief shrinking buy-to-let profits, coupled with the introduction of a 3% stamp duty on second homes, property investors are now faced with higher costs which in effect has prompted the need to generate more income. However, due to the Brexit uncertainty many property investors and landlords are unsure if property prices will plateau or plummet and are therefore seeking alternative methods to maximise profits- by adding value to their properties through refurbishments, rather than purchase property as a straightforward portfolio investment. At mtf, we have certainly seen an increase in demand for funds to conduct bathroom and kitchen conversions, loft conversions and to convert properties into an HMO.

Gareth Lewis, mtf’s commercial director echoes the need for property investors to add value to their portfolios. ‘The uncertainty with Brexit means that property investors are not waiting for the government before they seek other options for their portfolios’ he said.

‘They are resilient and savvy, so they will be watching the negotiations closely whilst bolstering their investments and taking opportunities, to allow them to withstand such an economic change’ he adds.

Gareth remains optimistic about the market and believes it is still liquid despite the Brexit uncertainty. ‘There are still lots of opportunities for property investors such as the demand for HMOs due to the rising population in the UK. Investors have therefore changed tact and rather than buying lots of properties that are ready to be let, are doing heavy refurbishments to attract renters or add values to their portfolios’ he said. ‘As we all know, there is still demand houses so as long as that demand remains, property investors will be willing to service the market’ he added.

‘The results from the survey shows that 80% of those affected by the new HMO rules are not willing to sell their portfolio. This reinforces my point that these landlords are looking to hold onto their portfolios and the property market is not experiencing a mass exodus despite regulatory changes or Brexit’ Lewis said.

According to Gareth, the uses of bridging finance has also changed to go with the trend. ‘A lot of the new cases that have come through to us recently are mainly for either refurbishment or using bridging to inject cash to the investor’s businesses. This shows the flexibility of bridging finance as a tool for property investors to service their needs whilst offering competitive rates and access to funds quickly’’ he said.
Bridging finance remains a good source of funding for investors with interest rates starting from 0.75%. ‘At mtf especially, our loans are flexible, offering the landlords peace of mind. We also do not have any early exit fees, so they are free to repay the loan whenever they want’ he added.

Gareth has also seen investors choosing to get funds released in stages to first bolster their property’s value through the refurbishment phase, and later withdraw further funds for further property transactions whilst they wait for the sale of the existing project.

‘The Brexit negotiation process will remain in the thoughts of investors and businesses alike. However, bridging finance enables landlords and investors alike to have access to funding in times such as these, allowing them to continue to thrive and take opportunities as they arise’ he added.

To find out more, speak a member of our team on 0203 475 0176 or click here to fill out our quick enquiry form.

james-anderson

How we make bridging finance effortless for our clients

For a client using bridging finance, certainty and fast access to funds are always at the forefront of their expectations. This is because, by its very nature, bridging finance should be fast and flexible compared to traditional funding methods, such as mortgages.

At mtf, we have not lost sight of this at a time when other lenders are moving on to computer banking models and lengthy application processes.

It is important to us that our brokers, introducers, and clients know they are dealing with people and not a corporation. Therefore, we go to great lengths to ensure that we deliver an open, communicative, and transparent service, and take the time to listen and fully consider each application. From start to finish there is direct dialogue with a decision maker who has the ability to make executive, pragmatic decisions and to drive a case home to completion.

We have built our underwriting process around a simple idea; the value of a property and the rationale of a loan are the most relevant criteria when assessing any bridging finance application.

As speed is such a vital element of bridging finance it’s important that all parties involved move swiftly because if they cannot complete to the borrower’s schedule, the client could miss out on an opportunity. Therefore, mtf has its own legal underwriting team who is responsible for driving the legal process. We feel by having a dedicated team, working in tandem with external lawyers, mtf significantly reduces any chance of delay or misunderstanding.

mtf is committed to building strong relationships. We have never over promised or under delivered because we don’t want to let our brokers or clients down. We always make sure we are continuously working hard to meet requirements.

In a recent example, a client wanted to purchase an investment property and required funds within a fortnight. The client was in Jamaica at the time and due to other commitments, was unable to come back to the UK in time to verify their identification documents. Time was fast running out for the client as he was about to lose an investment purchase.

So, we decided that I would fly out to Jamaica to meet the client, verify his ID, and witness the signing of the legal documents. I immediately flew back with all the signed documents allowing us to proceed with the loan. The client was then able to purchase the investment property with the funds from mtf with days to spare.

It’s important to note that this was for a £150,000 loan, not that of a million pounds plus, demonstrating how mtf will go the extra mile for the client, regardless of the loan amount requested.

Most lenders promise a great and fast service. At mtf, we understand that a promise is only good when it is delivered. We have built the company’s reputation around a strong service proposition, by being open and communicative and running an efficient operation. We are grateful to have received multiple industry awards in recognition of our approach to lending and the exceptional service we consistently deliver.

Enquire for bridging finance today.

Refurbishment most popular use for bridging loans in Q2

Funding refurbishments was the most popular reason for obtaining bridging finance in Q2 2018, according to the latest Bridging Trends data.

Just over a third (34%) of all lending in the second quarter of 2018 was for refurbishment purposes, up from 18% during the first quarter of 2018, as borrowers sought to maximise the value of their existing assets.

This is the second time refurbishments and home improvements were the most popular purpose since Bridging Trends launched in April 2015- the previous time was during the same quarter last year.

Investors are evidently opting for fast and flexible bridging loans to make improvements to properties and bolster yields against a backdrop of legislation that has made it tougher to buy new properties. At the same time, mainstream banks continue to reign in lending.

Consequently, bridging loans for mortgage delays and auction purchases were down on the previous quarter falling by 4% and 13%, respectively.

Bridging loan volume transacted by contributors hit £197.94 million in Q2 2018, an increase of £43.9 million on the previous quarter. This is the highest figure to date and comes as three new contributors joined Bridging Trends- Complete FS, Finance 4 Business and Pure Commercial Finance, have

Regulated bridging loans fell to the lowest level since 2015, coming in at 36.8% of lending in Q2, from 43.7% in Q1.

However, second charge lending increased to 19.1% of all loans during Q2, up from 16.3%.

Average LTV levels increased by 7.8% in the second quarter to 56.9%, whilst the average monthly interest rate remained at 0.83% for the third consecutive quarter.

Turnaround times were quicker in the second quarter, as the average completion time on a bridging loan application decreased by 5 days in Q2 2018, to 43 days.

The average term of a bridging loan in the second quarter remained at 11 months.

Key data points from Bridging Trends Q2 2018:

  • 3 new contributors join Bridging Trends
  • Refurbishment most popular use for bridging finance
  • Regulated lending hits lowest level since 2015
  • Average monthly interest rate stays at 0.83% for 3rd consecutive quarter

To view the Bridging Trends Q2 2018 infographic, please visit www.bridgingtrends.com

 

mtf launches new heavy refurb bridging products

We have launched a new heavy refurb range with reduced rates to support our brokers and clients.

The new heavy refurb bridging products are available from 0.80% on LTVs of up to 70% of the open market value.

These new products are designed to cater for the increase in demand from our borrowers who are wishing to add value to their investment by undertaking heavy refurbishment works.  We accept both first and second charge applications with up to a 24-month loan term. There are no exit fees or early repayment penalties.

Borrowers can apply as individuals or through limited companies and the types of heavy refurbishment accepted include basement digs, loft conversions, completing a development project and commercial conversions to residential.

As part of the changes, we have simplified our pricing and dropped rates across our entire range. Rates now start from 0.75% on both our first and second charge bridging loans.

Over the past 10-years, mtf has been consistently improving and streamlining its processes to offer borrower-friendly, fuss-free products that are transparent from the outset.

Having listened to feedback from broker partners and clients, we have created these new products to help property investors and developers access the finance they need, with speed and with minimum fuss.

Property investors and developers are integral to the UK housing market, so it is vital they get the support they need so they can continue to provide supply to meet the ever-constant demand. At mtf, we are dedicated to supporting property investors and developers with the funding they require through our range of 1st and 2nd charge bridging loan products.

To find out more, speak a member of our team on 0203 051 2331 or click here to fill out our quick enquiry form.

renovation

Bridging loans boost property values

Funding a development project is the most popular use for bridging loans, according to the latest results from our Broker Sentiment Survey.

Property investors are increasingly turning to bridging finance to fund development projects and refurbishments, taking advantage of vast liquidity on offer to improve new or existing portfolio properties and maximise the value of their assets.

A third of the 122 respondents in our latest survey said the most popular reason for taking out a bridging loan in the second quarter of this year was to fund a development project, up from 24% during the same period of 2017.

Investors are opting for fast and flexible bridging loans to make improvements to properties and bolster yields against a backdrop of legislation that has made it tougher to buy new properties. At the same time mainstream banks continue to reign in lending.

26% of the respondents said buy-to-let lending restrictions was the biggest challenge facing UK finance brokers, while 24% said it was the Government’s continued changes to buy-to-let legislation. 

Due to these challenges, overall demand for bridging finance increased in the second quarter, with 38% of brokers noticing a rise in bridging loan volume, up from 30% in the first quarter of 2018.

The biggest demand for bridging loans in Q2 2018 came from the South East at 30%, followed by the midlands at 19%.

With mainstream lenders implementing tougher restrictions, it has been harder for investors to access funds. The feedback from our brokers suggests that more are turning to bridging finance as a result. In particular, investors are looking to add value to a property rather than purchase a property as a straight forward portfolio investment.

This trend is evidently not just limited to light and decorative refurbishment, but also property conversion, extensions, reconfiguration and smaller scale ground up developments.

We believe we will continue to see a substantial rise in the demand for development and refurbishment products throughout the rest of the year.

For more information or if you have an enquiry you would like to discuss, contact our team on 0203 051 2331