Bridging loan interest rates drop to lowest level

Bridging loan interest rates fell to the lowest level in Q1 2019, according to the latest Bridging Trends data.

The average monthly interest rate on a bridging loan fell to 0.74% in the first quarter of 2019, down from 0.80% in Q4 2018, the lowest rate ever recorded by Bridging Trends since its launch in 2015.

This drop is driven mainly by the boost in regulated lending over the past three months. Regulated bridging loans increased for the first time since Q1 2018, with the number of regulated loans conducted by contributors increasing to 38.3% in Q1 2019, compared to 31.6% during Q4 2018.

The spike in regulated bridging activity also translated into lower LTVs, with average LTV levels in Q1 2019 decreasing to 51.3%, from 57% in the previous quarter.

Bridging loan volume transacted by contributors hit £185.32 million in Q1 2019, 8% lower than the £201.57 million lent by contributors in Q4 2018 but 20% higher than a year earlier (£154.02m). This comes as two new contributors join Bridging Trends- specialist finance packagers, Impact Specialist Finance (previously AToM), and UK Property Finance.

The most popular reason for borrowers taking out a bridging loan in Q1 2019 was for the purchase of an investment property, as property investors continued to purchase property despite a backdrop of uncertainty surrounding Brexit.

The second most popular reason was for chain- breaking purposes, accounting for 19% of all lending in the first quarter.

First legal charge lending dropped marginally to 81.7% of all loans during Q1 2019, from 82% in the previous quarter.

The average term of a bridging loan remained at 12 months during the first quarter. A completion time of 40 days during Q1 2019 was lower than an average completion time of 42 days during Q4 2018.

Bridging Trends is a quarterly publication grouping together the figures from short-term loan lender, MT Finance, and specialist finance brokers: Brightstar Financial, Clever Lending, Complete FS, Enness, Impact Specialist Finance, Positive Lending, Pure Commercial Finance, Y3S, and UK Property Finance, to monitor the general trends in the UK bridging finance market.

 

Key findings from Bridging Trends Q1 2019:

  • Monthly interest rates fall to lowest level
  • Regulated bridging transactions increase for first time in a year
  • Investment property purchase most popular reason for taking out a bridging loan

Property investors are continuing to turn to bridging finance as a support tool, as reflected in the 22% utilising the product for investment purposes.

With highly professional specialist lenders offering flexible products at competitive rates, bridging finance has become an attractive proposition to those property investors who are looking to expand their portfolio and need certainty when conducting their business and who often need to move swiftly to capitalise on an opportunity.

For more information on how a bridging loan could help turn your aspiration into achievement, contact the team on 0203 051 2331 or request a call back here.

Professional landlords call for manual underwriting process

Over a third of property investors want buy-to-let lenders to apply a manual underwriting process for professional landlords, as they struggle to obtain buy-to-let mortgages off the high street.

The results from MT Finance’s latest property Investor Survey showed that 42% of property investors said they had struggled to secure a mainstream buy-to-let mortgage in the last 12 months, with 54% citing affordability criteria as the primary barrier to mainstream funding.

This was followed by age restrictions at 32% and insufficient deposit capital at 14%.

 

Yet, 46% of those unable to obtain a BTL mortgage filled the funding gap with other sources of liquidity, as 50% of those opted for bridging loans, 34% refinanced through a specialist BTL lender, and 16% opted for a secured loan.

 

As a result, 58% of the 125 property investors surveyed do not think buy-to-let lenders are doing enough to support them.

 

When asked what mainstream buy-to-let lenders could do to better support them, 36% said applying a manual underwriting process for professional landlords would better support them, followed by increasing LTV thresholds at 32% and relaxing age restrictions at 26%.

 

The results from our Q1 2019 Property Investor Survey reflects the impact of stricter affordability and stress testing from high-street lenders on professional property investors’ ability to obtain mainstream funding.

The need for reliable, transparent, and quick access to funds is ever-critical and specialist finance- such as bridging loans, will continue to pick up when a more personalised approach to underwriting is required.

With highly professional specialist lenders offering flexible products at competitive rates, bridging finance has become an attractive proposition to those property investors who are looking to expand their portfolio and need certainty when conducting their business and who often need to move swiftly to capitalise on an opportunity.

For more information on how a bridging loan could help you purchase an investment property, call us on 0203 051 2331 or fill in our contact form and a member of the team will be in touch to discuss your enquiry.

Global Institutional Investment Manager backs MT Finance

We are delighted to announce we have entered into an agreement with a Global Institutional Investment Manager with over $1.6 Trillion of assets under management.  Under the agreement, the Fund has committed to initially acquiring up to £100m of bridging loan assets from the company.

This new agreement follows a similar agreement entered into with the same Investment Manager in 2017 and reflects the successful performance of MT Finance in the past two years. It follows MT Finance having successfully secured £50m in funding from Insight Asset Management in December 2018. MT Finance is now uniquely placed in the short-term lending sector to continue to support property professionals, business owners, and individuals with their finance requirements in the months and years ahead.

Established in 2008, by co-founders Joshua Elash and Tomer Aboody, MT Finance has grown to become one of the largest specialist lenders in the UK.  MT Finance’s reputation in the market excels for delivering fit for purpose bridging loans at sensible rates, and its approach to lending is something that has been consistently recognised within the financial services industry with the company winning various sector awards including Best Short-Term Lender at the Mortgage Strategy Awards 2019.

Joshua Elash, MT Finance co-founder, said: “This is a significant endorsement. We have shown discipline and have applied a commercial but sensible approach over the last two years. This new funding reflects the confidence our institutional partners place in MT Finance. We are delighted to continue to be partnering with one of the largest financial institutions in the world, and this additional financial support enables the company to drive forward the ambitious growth plans we have in place to ensure MT Finance continues its development towards becoming the market leading bridging finance provider.”

MT Finance is advised by the Financial Services Corporate Finance team at EY.  Joshua Elash said, “we would like to give our thanks to Nick Parkhouse and the team at EY for their continued support and guidance as a key strategic advisor.” Nick Parkhouse, a Partner in the Financial Services Corporate Finance team, said: “the team here is absolutely delighted for Joshua and Tomer and the whole team at MT Finance and look forward to continuing to support them in their future successes.”

How MT Finance supports SMEs

According to the British Business Bank’s latest Small Business Finance Markets report, a large proportion of UK SMEs expect access to funding to become more difficult following the UK’s departure from the European Union.

SMEs are a critical part of the UK economy, accounting for around 60% of private sector employment and half the annual turnover of all private sector businesses but many have struggled from a lack of liquidity following the financial crisis, amalgamated with uncertainty surrounding Brexit.

Banks have been particularly wary of lending to smaller businesses, concerned that a no-deal Brexit could result in a slowdown of the economy and impact on their ability to pay back loans.

However, over the past decade, there has been significant developments from the alternative finance industry that have given SMEs a wider choice of ways to finance their aspirations.  Today there is a whole range of non-bank funding solutions successfully lending to small businesses and one such source that has become a critical tool to fund the SME community is bridging finance.

There is an array of instances where bridging finance is the ideal solution for companies needing quick access to funds or to plug a gap that traditional lenders are unable to fill. Whether funds are needed to acquire stock, to facilitate a new venture, or provide additional capital to stimulate growth.

As an example, MT Finance was recently approached by a client who owned a successful textile manufacturing company and as part of his growth strategy, was looking for funds to help him acquire a similar company.

As part of the acquisition, the client was able to take over an existing contract for materials and products from Southeast Asia, including a shipment that had already been approved and prepared. However, the sellers had a specific completion date which meant the client needed to move quickly to take advantage of the opportunity.

He had attempted to borrow against his main residence, valued at £950,000, which had an existing first charge mortgage of £295,000. However, his existing mortgage lender was unable to provide additional funding against the property in the time-frame required. Due to time sensitivity, the client’s broker contacted us straight away.

On receipt of the enquiry, we were able to give an immediate decision and issued the offer in principle that day. As we were faced with roughly 2 weeks to deliver the funds, we immediately instructed the valuation at the same time as going to offer.

In just 13 days, we provided the £275,000 second charge bridging loan, at 60% LTV, based on the current open market value of the client’s property. Interest was retained at 0.85% over 12 months, with no exit fees or early repayment charges. No personal guarantees were required.

Our bridging loan meant the client was able to complete the acquisition by the specified completion date and capitalise on a fantastic investment to his business. Within 9 months the client was able to show a trading pattern and increased income that allowed him to raise funds to exit our loan.

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For those SMEs relying on traditional bank loans for finance means there’s a large segment of the SME community that isn’t benefiting from access to funding when they otherwise should be. Alternative finance products such as bridging loans, crowdfunding, and invoice finance can help business owners access the most appropriate finance for their needs from this more diverse market.

It’s certainly been a tough time for business owners over the last decade, but as traditional lenders fail to meet expectations, alternative lenders are indeed stepping in to meet the needs of SMEs. MT Finance is committed to supporting the SME sector- since 2008 we have been delighted to help UK SMEs invest in manufacturing, technology, and development of their businesses.

For more information on how we could help support your business, call us on 0203 051 2331 or fill in our contact form and a member of the team will contact you shortly to discuss your requirements.

MT Finance Hires BDM for Northern Expansion

We are pleased to announce that we have appointed Jamie Gillespie as business development manager covering the Midlands and North of England areas, to support our continued regional expansion.

He will work alongside the Company’s existing team of BDMs, headed up by Commercial Director, Gareth Lewis.

Jamie previously held roles at Freedom Finance and Fluent Money, and more recently with Seneca Bridging as business development manager.

The appointment is our second hire outside of London, following the recruitment of Richard Sherman as BDM for Wales and the South East in September 2018.

Jamie said:

“I’m massively excited about the ambitions MT Finance have and I’m looking forward to getting out on the road and offering our products and award-winning service to as many new and old faces as possible.”

Gareth Lewis, commercial director, added:

“We have been looking to strengthen our sales team and broaden our reach in order to support introducers across the country, and Jamie’s appointment is testament to this.

“Jamie’s enthusiasm and drive will be there for all to see and we look forward to him hitting the ground running.”

Benefits of a second charge bridging loan

An increasing number of people in need of extra funds are turning to second charge bridging loans to purchase investment properties, inject capital into businesses, or make refurbishments in order to prevent disturbing their existing attractive mortgages.

Demand for second charge lending is set to increase throughout the year. In a sustained low-interest rate environment, it now often makes more sense for a borrower to release equity on a property by taking out a second charge, rather than the prospect of refinancing away from their current deal.

A second charge bridging loan could be the ideal solution for those who already have a mortgage secured against their property but requires further funds for a short period of time.

Second charge bridging loans can be used for many reasons, such as purchasing an investment property, business expansion, and redevelopment of an existing property to name but a few.

What is a second charge bridging loan?

A second charge bridging loan sits behind an existing loan or mortgage. If there is enough equity left in the property to secure another loan against it, a second legal charge may be taken out.

A second legal charge can be secured on all property types, including buy-to-let, residential and commercial assets, and typically has a 12-month maturity, unlike a secured loan which is a form of longer-term financing.

As it sits behind a first charge loan, a second charge will always require consent from the first charge lender and is usually more expensive than a first charge, reflecting the additional risk taken by a finance provider.

When are second charge bridging loans beneficial?

  1. If you are on a low rate/interest-only mortgage

Using a second charge bridging loan means you keep your existing mortgage rate. There would be no changes to the existing mortgage terms and conditions. A second charge could allow for more flexible repayment terms, which could potentially save thousands of pounds in interest.

  2. If you’re locked into a fixed rate with early repayment charges

If you must pay a large penalty for stopping/switching your existing fixed rate mortgage early, a second charge loan may be cheaper as the existing mortgage stays in place and the penalty is not charged.  It would be beneficial to run a cost comparison in this scenario.

   3. You’re unable to secure further funds from your mainstream lender

Mortgage rules have become stricter in the past couple of years, with lenders applying tough ‘stress’ tests to make sure borrowers can meet repayments if interest rates rise.  However, second charge bridging loan providers don’t rely on the same tests and can tailor a solution to suit your individual borrowing needs. Second charge bridging loans are also particularly helpful for those with unusual income structures, such as the self-employed, or those with complex financial backgrounds.

4. You need the funds quickly

Where a mainstream bank may take several months to put together a loan for a borrower, a bridging finance company is often able to make lending decisions within hours of initial enquiry, so funds can be released quickly, sometimes even in less than a week. A second charge bridging loan can be a useful tool for those who simply need a rapid cash injection.

How much can you borrow?

You can borrow a maximum of 70% loan-to-value and loans can be arranged from £100k to £5m. The actual amount will depend on the available equity in the property and affordability of the loan.

How can MT Finance help?

At MT Finance, we believe a second charge bridging loan is about empowering borrowers to enable them to take advantage of time-sensitive opportunities that can make or save them money.

As an example, we helped a client who required £349,000 second charge loan on her £8.5m property. The client was part way through refurbishing her investment property, but the process had been delayed. She didn’t want to remortgage as she intended to sell the investment property as soon as the refurbishment works on it were complete and didn’t want to be penalised for early repayment.

In just 12 days, MT Finance provided a £349,000 million second charge bridging loan at 39% LTV. Interest was retained over 12 months, with no exit fees or early repayment charges. No personal guarantees were required.

Our second charge bridging loan gave her time to carry out the works and significantly increase the value of her investment property. The client will sell the investment asset to exit the bridging loan, against the higher value.

Second charge bridging loans will continue to offer significant financial savings for a wide range of borrowers, not just those who may struggle to obtain finance through traditional routes.

MT Finance is a multi-award-winning bridging finance lender and we have many years’ experience and know-how when it comes to second legal charges. We assess every single application for a second charge loan on a case by case basis, assessing each case on its own merits. Our flexible approach means we can structure your second charge bridging loan to your exact requirements and allows us to make quick decisions and deliver funds at speed. We also do not charge any exit fees or early repayment fees and do not have any lengthy and tedious application forms for you to fill out.

Our entire application process is quick and easy and with highly competitive interest rates and no upfront fees, we offer a fast, transparent, and stress-free service.

Contact us today by calling 0203 051 2331 or filling in our contact form. Our team are on hand to discuss your second charge bridging loan enquiry and will be happy to answer all your questions and allay any concerns. Please note that if the second charge loan is secured on a residential property, it must be for business use only.

MT Finance appoints senior underwriter

We’re pleased to announce that MT Finance has appointed Cattrina Wigley as Senior Underwriter.

Cattrina joins MT Finance from Octopus Property (previously Dragonfly), where she was a Credit Manager.

Cattrina has over 14 years of experience working in the financial services industry having started her career in 2004 as a fully qualified regulated mortgage broker. Cattrina previously held underwriting roles at several specialist finance firms including Castle Trust, before joining Octopus Property in 2014.

In her new role, Cattrina will play a significant role in managing our lending process from application through to drawdown.

Cattrina’s appointment comes alongside two recent further hires of an Operations Manager and a New Business Executive.

Gareth Lewis, Commercial Director at MT Finance, said:

 “We are delighted to welcome Cattrina to the team at MT Finance. As part of our continued growth plans her experience will be greatly received, as will the knowledge she brings to the team. We all look forward to working with her.”

Cattrina Wigley, Senior Underwriter at MT Finance, said: 

 “MT Finance has a fantastic reputation within the industry. I’ve dealt with them in the past and have always been impressed with the way they work.

“As one of the leading specialist short-term lenders in the market, joining the MT Finance team is a great opportunity to further my skills and I’m looking forward to be a part of their growth plans and further success.”

 

MT Finance secures £50m funding deal from Insight Investment

MT Finance Limited (“MTF”), an award-winning specialist short-term property lender, today announces the completion of new senior and mezzanine debt facilities to enhance its lending capabilities to the UK property finance market.

MTF has raised up to £50m of senior funding from funds managed by Insight Investment alongside mezzanine funding from an unnamed UK fund manager. These new lines further diversify the funding structure of the business that currently includes a £125m committed forward-flow arrangement with a Global Institutional Investment Manager, as well as almost £100m from a portfolio of High-Net-Worth individuals.

Established in 2008 by co-founders Joshua Elash and Tomer Aboody, MTF has quickly established its reputation for providing outstanding customer service and the ability to complete loans quickly. MTF has successfully completed in excess of £200m loans in the preceding 12 months and had a record month of originations in November.

MTF’s reputation in the market excels for delivering fit for purpose bridging loans at sensible rates, and its approach to lending is something that has been consistently recognised within the financial services industry, with the company winning various sector awards including “Best Service from A Bridging Finance Provider” in the 2018 Business Moneyfacts Awards.

Joshua Elash, co-founder, said, “MTF has assisted property professionals, business owners, and individuals with their finance requirements for the last 10 years. This additional funding will enable us to continue to provide leading, competitive, and relevant products to our clients into 2019 and beyond.”

Commenting on the transaction, Jeremy Deacon, Insight Investment added,

“Our Secured Finance strategy continues to seek compelling asset-backed structures that provide our clients with attractive risk-adjusted return while capturing the complexity/illiquidity premium on offer in the private ABS market. We have known Joshua and Tomer for the past few years and they have built an impressive bridging platform underpinned by good credit and service. We are pleased to support MTF on the next stage of their journey through the provision of scalable senior funding and look forward to a fruitful relationship over the next few years.”

MTF was advised by the Financial Services Corporate Finance team at EY.

Jordan Blakesley, Senior Manager, said, “We are delighted to have assisted MTF with the debt-raising process. The support demonstrates the strength of the underlying MTF platform and will enable the MTF team to act on the sizeable opportunities they are seeing in the market.”

Lee Doyle, Matthew Pentecost, and Elizabeth Street-Thompson from the banking team at Ashurst LLP provided legal advice to MTF.

Michael Lorraine, Kathryn James, and Annabel Rolls from the asset-backed finance team at Simmons & Simmons LLP provided legal advice to Insight Investment.

Regulated bridging slows to lowest level since Q1 2015

Regulated bridging loans fell in the third quarter to the lowest level since Q1 2015, according to the latest Bridging Trends data.

The number of regulated loans conducted by Bridging Trends contributors fell for the second consecutive quarter, to 31.6% of all lending in Q3 2018, compared to 36.8% during Q2 2018.

This is the lowest level since Q1 2015, when the number of regulated bridging loans transacted was at 31.5% of all lending.

Bridging loan volume transacted by contributors hit £213.35 million in Q3 2018, an increase of £15.4 million in the previous quarter. This is the highest figure to date and comes as another new contributor joins Bridging Trends- specialist finance packager, Clever Lending.

First legal charge lending increased to 84.4% of all bridging loans during Q3 2018, up from 80.9% in the second quarter. Meanwhile, second charge loans decreased to 15.6% compared to 19.1% during Q2 2018.

For the second consecutive quarter, refurbishment purposes were the most popular reason for obtaining a bridging loan, as borrowers continued to add value to existing and newly purchased properties.

Mortgage delays were the second most popular reason for obtaining a bridging loan, accounting for 19% of all lending, down from 20% in the previous quarter.  Whilst loans for auction purchases and business purposes increased in the third quarter by 3% and 1% respectively.

The average monthly interest rate dropped to 0.78% in Q3, from 0.83% in Q2 2018- the lowest rate recorded since Q4 2016. This activity translated into lower LTVs, with average LTV levels in Q3 decreasing by 1.5% to 55.4%.

The average completion time on a bridging loan application jumped to 46 days during the third quarter from 43 during the second quarter, as service and resource levels were impacted by annual leave.

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

 

 

Half of brokers see rise in bridging loan volume

Demand for bridging finance grew in the third quarter of 2018, with almost half (48%) of brokers experiencing a rise in bridging loan volume, up from 38% in the second quarter of 2018, according to our latest Broker Sentiment Survey.

A mere 17% of brokers did not experience a rise in bridging loan volume in Q3 2018.

 

Feedback from brokers points to a strong need for specialist lending. However, the geographical spread of bridging loan demand narrowed in the third quarter the year, with demand in the North West, South West, and Scotland dropping off from the previous quarter. The South East saw the biggest demand for bridging loans in the UK at 48%, up from 30% in Q2. The second highest area of demand was London, at 41%.

 

For the third consecutive quarter, funding development projects was the most popular reason for taking out a bridging loan at 31%. Business purposes was the second most popular reason at 21%, up from 16% in the second quarter of 2018.

 

However, two thirds (66%) of brokers said the bridging loan process is longer than it was 12 months ago.

 

With the majority (48%) suggesting 3-4 weeks was the average length to complete a bridging loan. While 21% indicated that bridging loan cases generally took 2-3 weeks to complete.

61% of the 113 brokers surveyed blamed solicitors as the main reason for delays, followed by the valuer at 16%.

Need for Speed

The bridging finance industry is in promising shape and demand continues to grow, particularly from property investors looking to fund development projects in London and the South East.

However, speed has always been a vital element in bridging finance and it is essential we don’t lose sight of this. It is important that all parties involved- the lender, lawyer, valuer, and the broker, move swiftly to complete to the borrower’s schedule.

It is important we stay true to the fundamentals of bridging: providing borrowers with fast access to the capital they need in a responsible and sustainable way and not fall into the more traditional computer banking model.

At mtf, we are always looking at ways to make enhancements to our processes in order to minimise transaction delays. For example, we have a team of in-house legal underwriters. This approach makes our process faster and much more efficient. The team all come from a legal background and because they each understand the legal principles of a bridging loan application, can mitigate risk as they have the knowledge and expertise to flag certain points to the attention of our solicitors. Their expertise also allows mtf to take a commercial view on certain matters, so our solicitors aren’t bogged down unnecessarily- this really speeds up the process.

For more information, or if you have an enquiry you wish to discuss, please don’t hesitate to contact the team on 0203 051 2331.