Turning challenges into opportunities

The following article is written in association with LendInvest

“It's challenging for everyone at the moment, for lenders, brokers and customers,” acknowledged Leanne Smith, head of bridging at LendInvest, a leading online marketplace for property lending and investment.

“There’s the cost of living, rising interest rates, high inflation, and all of that adds up to the uncertainty in this market. However, there are always opportunities in the specialist lending sector when you have a challenging market, which is something we thrive on at LendInvest.”

Those opportunities stem from borrowers seeking viable funding alternatives in an increasingly unforgiving economic climate. With lenders such as LendInvest highlighting the benefits of bridging, customers are evidently seeing its real potential.  

“Bridging is becoming extremely popular and busier than it's ever been,” Smith confirmed. “Bridging numbers are constantly increasing. It's at an all-time high in terms of the loan book across all the industry lenders.

“Previously, it did not have the best reputation, but now it's respected as a short-term solution for many different property transactions and it’s becoming more mainstream. Borrowers are starting to consider taking a short-term bridging loan, potentially whilst the market settles.

“With large numbers of fixed periods due to end for borrowers this year, it will definitely widen the opportunity for bridging finance. The rates aren't too dissimilar, in the grand scheme of things, compared to long term mortgages.”

As Smith explained, maximising the growth of the bridging market involved education for brokers and borrowers, who might never have used bridging before.

“It’s about debunking the myth that it is expensive,” she shared, “showing that it’s a-common sense approach that gets a borrower out of a situation and allows them to get their planning in place for example, or to secure an asset and either exit onto a buy-to-let, development finance or resale. We need to make sure that there is a viable exit for the bridging loan and they're not on higher rates for the long term.”

Aiming to enlighten brokers who primarily deal with the prime, residential market, LendInvest holds dedicated educational events on bridging,

“These introduce new brokers to the bridging space and fill in any gaps in knowledge,” Smith elaborated, “so people can understand that there are benefits to the costs and the structure, to make a transaction work and hold up for a client. It can effectively act like a business plan for borrowers, for their investment opportunities, orto bridge the gap for a chain break on a regulated bridging loan.

“The key things to understand are, why is a bridging loan required, what is the security, who is the borrower, and what's the exit strategy? Sometimes, in these uncertain times, you probably want multiple exit options, to make sure that you're not making that customer a prisoner.”

Underpinning LendInvest’s bridging process is the technology behind its own, inhouse portal.

“Technology is at the heart of LendInvest,” enthused Smith. “We're hugely focused on making that end-to-end journey seamless for the broker and the borrower, through the technology that we've built. With bridging, we've managed to simplify the inquiry process to 10 clicks, before terms are potentially approved.

“The whole point of bridging finance is that it’s fast. It's not meant to take as long as your typical mortgage. Managing cases on our portal, it’s an extremely quick enquiry and application process and even more so if it's a repeat borrower because everything is auto filled for the brokers. You don't have to re-key anything unless there have been changes to the borrowers’ circumstances.”

She continued: “Utilising things like an automated valuation model (AVM) proposition, that skips the valuation process and is done in minutes, rather than waiting weeks for a valuation report to come back, can secure a transaction quickly rather than a borrower losing a deal. The electronic signature options we email to the customer speeds it all up as well. Then in the background, once the application has been completed and signed, all the integrations that we've built internally, run the searches which saves the underwriters ample time keying in data.

“The portal provides live updates for the broker so, when they log in, they can access all their cases, and that speeds it up massively. They can see exactly where they are and use it like a CRM system. We've implemented a new chat function on our website too, which brokers can use to ask any type of criteria question, to get a fast response.”

Smith emphasised: “We're not robots though. We have got human beings behind everything, and they have got lots of experience within our teams, to make sure that each case is given the best possible customer service. We're able to look at cases on their own merit and take a commercial view, which is what bridging is typically about, and offer flexible criteria. Our flexibility on our product ranges assists all of our customers’ requirements.

“If we’re handling a development-to-development exit bridge, we ensure that we're utilising the same legal teams and valuers to make that process as smooth as possible and to keep the costs down for the borrower. When we're looking at a bridge-to-let case, we offer free evaluation and free legals for standard properties.”

LendInvest launched development finance in 2015, followed by buy-to-let in 2017, and residential mortgages this year, meaning that it can offer what it describes as ‘a vast suite of products.’ Smith highlighted the company’s resilience as another strength.

“We're extremely agile in a difficult market,” she considered. “We started the company in 2008, in the wake of a financial crisis, offering bridging finance for every type of property investor.  So, we have experience of innovating in a tough market. We've been through the highs and the lows, so that gives reassurance to brokers and borrowers that we know what we're doing, the assurance that they're speaking to a stable lender.

“When brokers and customers are dealing with a bridging lender, they want the confidence and security of being able to speak to someone who knows what they're talking about, someone who has longevity in the market and experience of commercial thinking and an understanding of a lender’s funding goes a long way.”

Smith believed the market was yet to see the full economic impact of recent successive rate rises.

“There’s likely to be a move in lenders’ criteria and loan to values on cases,” she reasoned. “Sadly, there is a likelihood of more distressed assets, which will open-up more auction opportunities for well-capitalised investors.

“Longer terms for bridging have always been requested and they're becoming more popular. Typically, they are 12 months, but we're starting to see more people asking for 18 months to provide enough time for them to get in and out of products in this uncertain market.”

LendInvest’s head of bridging reflected further: “Throughout our 15 years of lending, our approach has always been to conduct sensible lending - a very approachable way to lend in all circumstances, providing the best possible solutions to our customers.

“With a mixture of inhouse experts, high speed technology and a vast range of products, we strive to help those ambitious borrowers who want to contribute solutions to the UK housing shortage, by providing higher quality housing. “

Smith concluded, positively: “It is exactly the time to start thinking about innovation. There are a few things lined up that we're currently working on. So, watch this space.”