Brokers need to build relationships with alternative funders, says bank director
Specialist lenders are stepping up to support commercial projects which would previously have been backed by high street funders, according to Conor McDermott, director of SME at LHV bank.
McDermott (pictured left), who oversees the bank’s lending solutions for UK businesses, is calling on brokers to build relationships with specialists to maximise the opportunities of available finance, which he describes as being at an ‘all-time high’.
Undeniably ambitious, LHV gained its UK banking licence little over a year ago, in May 2023, and reported a profit after tax of £6.4 million in its first year of operation.
“The market is currently experiencing a retrenchment by high street lenders, but debt availability through specialist lenders is at an all-time high,” McDermott told Mortgage Introducer. “For experienced investors with viable transactions, debt finance remains readily accessible. There is especially strong availability of short-term finance, where investors can take advantage of shorter transaction times to act quickly on opportunities.”
How much demand is there for bridging?
Bridging loan books hit a record high in Q1 2024, reaching £8.1 billion, according to data from The Bridging & Development Lenders Association (BDLA). Completions were £1.51 billion, representing a 6.2% increase on the same period in 2023.
BDLA has reported that the pipeline for business is strong, with applications showing an increase of 17.5% in the first quarter of 2024. The average LTV for bridging lending was 60.5%. “Demand for bridging finance continues to be strong,” said Vic Jannels (pictured right), CEO of BDLA. “This is an exciting time for the sector.”
McDermott agrees. He believes the broker community can benefit from a thriving market.
“Invest in building relationships with specialist lenders and gain a deeper understanding beyond basic product knowledge,” he urged advisers. “This will inform what solutions can be structured. We are keen to take, develop and deliver solutions that can extend beyond simple product tweaks.
“Once clients experience the wider solutions that can be available, develop relationships with brokers and their lenders, and benefit from the typically more flexible approaches offered by specialist finance, they often hesitate to return to high street lenders.”
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What are the opportunities for property investors?
Specialist finance comes into its own in challenging economic times, acknowledged McDermott, who previously worked for Allied Irish Bank, Metro Bank and the challenger bank Monument. But, as the market settles, he believes property investors will identify new investment scenarios, particularly within multi-occupancy accommodation.
“Opportunities will become more fluid whilst requiring more innovative and responsive solutions,” he reasoned. “We see significant potential in the mixed living space, for example. Combining specialist BTL, CRE (commercial real estate) investment, and strategic use of short-term finance will be key to capitalising on these opportunities.”
The BDLA is meanwhile developing plans to further grow awareness of bridging finance amongst brokers and customers. Last year it launched the Certified Practitioner in Specialist Property Finance, in a joint initiative with the Financial Intermediary & Broker Association and the London Institute of Banking & Finance. The accreditation aims to enhance standards, increase professionalism and advance the reputation of the specialist finance sector.
