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What Can Bridging Loans Be Used For?

Bridging Loan Uses

Sometimes you might need to access money quickly to buy a property and you cannot wait for the lengthy process of a mortgage application or a house sale, so you look for alternative finance options. One solution could be to borrow money from someone you know but if that is not an option, the next consideration is usually to apply for a Bridging Loan.

To find out more about how we can assist you with your Bridging Finance requirements, please click here to get in touch

What is a Bridging Loan?

A Bridging Loan is a short-term finance loan that can be used for a number of different reasons. It is commonly used to buy a property while an existing property is in the process of being sold but will not go through in time for the money to be available. It could also be used when someone buys a house at auction and they do not have the time to get a mortgage as they need to pay the seller quickly.

Another reason someone might choose to apply for a bridging loan is if they want to pay for urgent renovation work while they wait for a remortgage application to go through. Bridging Loans are frequently used by Property Investors but people who are not investors can also use it if they are in a situation that requires quick finance.

Types of Bridging Loans

There are two types of Bridging Loan:

Closed Bridging Loans

Closed Bridging Loans have a fixed date for the loan to be repaid. Typically, this will be used if you have exchanged contracts and are waiting for your property sale to complete. It may be that there has been a delay that means your mortgage loan is not ready yet. With this type of bridging loan, the lender will want to know exactly how you are going to repay the loan, for example, through sale of your property.

Open Bridging Loans

With an Open Bridging Loan there is no set date for repayment but most lenders would require it to be paid within a year, as it is only ever intended to be a short term finance solution. When you take out a bridging loan, you do not have to have a specific exit plan, such as the sale of a property.

Bridging Loans will usually have higher interest rates that standard loans, due to the quick solution that they provide. They are often referred to as gap financing because they are filling the gap until another finance option is available.

Who can use Bridging Loans?

Bridging Loans can be used by individuals or by businesses, provided that they meet the required criteria. Some Bridging Loans will require the applicant to have some type of collateral as part of the loan agreement, such as property.

How Businesses use Bridging Loans

Businesses often use Bridging Loans for reasons other than buying commercial property via a Commercial Bridging Loan. They sometimes use it to cover costs such as paying tax bills while waiting for another finance solution. Some business owners use a bridging loan to purchase another business in a takeover, or they might cover the costs of a development project.

Bridge Loans for Property

In some situations, a homebuyer may need to take out a bridging loan to pay for their new property while they wait for their existing property sale to go through. If there is a delay in the sale, to avoid their purchase falling through, they can arrange bridging finance to ensure it goes through.

There are fairly strict lending criteria for this type of bridging loan use and the applicant would have to have excellent credit ratings as well as a low debt-to-income ratio. Another part of the criteria that lenders usually require is that the bridge loan is only up to 80% of the combined value of the two properties, which means that the applicant must have a large amount of equity in their property.

If the applicant does have a bridging loan approved in this type of scenario, the mortgages for the two houses are rolled together.

Property investors and Bridging Loans

Many property investors use Bridging Loans to enable them to build up their property portfolio. When they are buying property at an auction, a quick way to finance the purchase is through a bridging loan but they also use bridging finance to buy properties on the market too. Often, property investors will need property purchases to go through as quickly as possible so that they can get tenants into rented property.

Another way that property investors sometimes use Bridging Loans is if they want to buy a property and refurb it and then sell it on for a higher value than they bought it for. This process is called flipping and a short-term loan is ideal as once the property is purchased, they will spend a few months on the refurbishment and then quickly sell the property on.

Experienced property investors are usually quite likely to get approved for a bridging loan because they will have accumulated a lot of collateral in their property portfolio.

How does a Bridging Loan work?

The way that a bridging loan usually works is that a ‘charge’ is placed on your property. This ‘charge’ is a legal agreement that determines which lenders would get paid first if you were to miss payments on your loan and fall into arrears. If you own your property, then the bridging loan would be your first charge but if you still had a mortgage on your property, the loan would be a second charge.

If you are unable to make the payments on your bridging loan, your property could be sold to pay the loan back to the lender.

Is a Bridging Loan expensive?

Generally, a bridging loan will cost more than a standard mortgage because it is a short-term arrangement and the lenders will want to make enough money from the short period of interest to make it profitable for them.

The fees are usually charged on a monthly basis, rather than an annual basis due to the loans usually only running for a number of months. A monthly fee might be somewhere between 0.5% and 1.5% per month, costing considerably more over a year than an average mortgage interest rate.

When you take out a bridging loan, you will also need to consider that there will be a set-up fee for the product, which will be around 2% of the loan, which can obviously end up being a very high amount if you are taking out a large bridging loan.

How much could I borrow with a Bridging Loan?

This varies massively depending on the applicant’s financial circumstances and amount of collateral. The criteria will also differ depending on the lender but a large number of lenders will only lend up to 75% loan-to-value of the applicant’s property. In certain circumstances, if the client has sufficient equity in other properties, then a 100% bridging finance can be provided.

If you are able to take out a first charge loan, because you have no outstanding mortgage on your property, you will usually be able to borrow more than if you are taking out a second charge loan.

Is a Bridging Loan the right option for me?

A bridging loan can be the ideal solution for many people but there are disadvantages to consider too. These are the main pros and cons to be aware of:

Pros and Cons of Bridging Loans

The main Pros of taking out a Bridging Loan include:

  • Fast access to money
  • Able to borrow a large sum of money
  • Protect property chains
  • Enable projects to go-ahead which otherwise wouldn’t
  • Flexible

The main Cons of Bridging Loans are:

  • The interest rates are usually high
  • You will usually pay a large fee for the set-up of the loan
  • By securing the loan against your property, your property is at risk

When you are deciding whether a Bridging Loan is the right option for your circumstances, you should review all of the different options that are available. For example, if you are buying a new property before your existing property sells, you might be able to take out a Buy-to-Let mortgage instead.

However, if you are looking for an option that enables you to have access to money straight away, either to purchase a property, pay tax bills or pay for property renovations, then a bridging loan may be a better option.

Many property investors and property developers use Bridging Loans as a way to get started and then once they have made enough capital, they can stop using Bridging Loans to avoid paying the higher interest rates that typically come with this type of finance solution.

It is a good idea to get financial advice from an expert before you consider taking out any type of financial product. At Commercial Finance Network, as the UK’s leading Bridging Finance Broker, we can provide free expert guidance and advice on Bridging Loans and can help you to find the right type of finance to suit your needs. As a truly independent Bridging Finance Broker, we also have access to all of the UK’s Bridging Finance Lenders, so we can most certainly secure you the best deal and rates available in the market. If you are interested in any our Bridging Finance services or you want to know how our services could potentially assist in moving your project forward to the next step, speak with one of our Specialist Bridging Brokers today on 03303 112 646 or else request a callback via our Quick Enquiry form below.

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Commercial Finance – Business Interruption Loans and COVID

How COVID-19 Has Impacted Commercial Finance

The COVID-19 pandemic has left a lasting impact on many aspects of life, from restrictions on social lives, to businesses going into administration. Even though the UK economy is now experiencing a period of positive growth, mainly due to the pace of the vaccination programme, the financial impact of the pandemic is still very visible.

Should you be looking for some free and friendly advice, contact our team on 03303 112 646 or send a message online to begin an email conversation should you prefer.

Shortly after the first lockdown restrictions came into place, lenders were quick to tighten their lending criteria, to try and protect themselves from the expected risk of higher unemployment levels and people struggling to pay off mortgages and loans.

Commercial finance was affected in a similar way, with so many businesses being forced to close during lockdown, the commercial finance landscape lurched into unknown territory.

Many businesses were provided with financial support in the form of furloughing, business interruption loans and bounce back loans but others were unable to apply for these. Some lenders offered holiday payments for commercial finance, so there were numerous financial support options in place to try and help struggling businesses survive the pandemic.


Commercial Mortgages UK Adverse Credit and BTL

As an independent UK Commercial Mortgage Broker we carefully examine all the Buy-to-Let mortgage offers from leading whole of market lenders across the UK. You will benefit from low interest rates, lenient eligibility criteria and a simplified procedure. You also have the choice of Second Charge Mortgages, Adverse Credit Mortgages for individuals with crediting challenges, to straightforward Residential Mortgages for your own home.

With the reassurance of attractive Mortgage Protection Insurancee options, we also offer specialist mortgage broker services such as self-employed Contractor Mortgages, Expat Mortgages, home loans and Sharia Mortgages, to commercial Serviced Accommodation Finance from holiday homes to Property Investors, Developers and existing Homeowners.

Business Loan Applications – UK’s Changing Priorities

The priority for the government was to assist existing businesses, rather than helping new businesses to launch, which was highlighted by the financial support options that were made available. Startup loans were still available from some lenders but it was now harder for many would-be entrepreneurs to access loans.

In the UK, many people use startup business loans to buy the equipment and pay for other essentials when they start up a business. With the economic downturn, many lenders have withdrawn products from the market and tighter lending criteria was applied.

However, the Bank of England cut interest rates down to 0.1% which meant that some of the new business loan interest rates have been more attractive for startup business owners, but there is a more comprehensive set of lending criteria to enable lenders to manage risk in the unstable climate.

COVID Government finance support schemes for businesses

To assist existing businesses who had been adversely affected by coronavirus, the government introduced the following schemes to support cashflow during this challenging period:

Interest-Free Business and Commercial Loans

Coronavirus Business Interruption Loan Scheme (CBILS)

SME businesses have been able to access business interruption loans for lost revenue and cashflow disruptions. The CBILS was also made available to businesses whose growth requirement could not be supported under standard bank lending criteria. Under the scheme, businesses who had been adversely affected by the pandemic could apply for loans of up to £5million.

The first 12 months of the loan is interest-free and the interest rates after a year for the CBILS scheme were set by the lenders. Some lenders provided the loans with an interest rate as low as 1.4%, while at the higher end of the scale, some lenders were offering the loans with a 8.9% interest rate. Terms were available for up to 10 years.

To encourage more lending, the government also guaranteed loan repayments, with the borrower being fully liable for the debt.

Lenders were able to provide the following finance under the CBILS scheme:

  • Term loans
  • Overdrafts
  • Invoice finance
  • Asset finance

Bounce Back Loan Scheme (BBLS) SME and Sole Trader Businesses

The Bounce Back Loan was aimed to support smaller businesses and sole traders, to provide them quick access to financial support. The scheme allowed businesses to borrow between £2,000 and up to 25% of their turnover (to a maximum of £50,000). For the first 12 months, there is no interest to pay and following that first year a rate of 2.5% would be applied.

The maximum loan length for the BBLS was six years and this scheme also came with a guarantee to the lender from the government for the repayment, with the borrower remaining liable for the debt.

Pay As You Grow (PAYG) Business Support

For businesses who took out the BBLS, the option for PAYG was later introduced to provide further support, allowing:

  • An extension of the loan term from six years up to 10 years, remaining at 2.5% interest rate.
  • Reduction of monthly payments by paying interest-only for six months. This could be requested up to three times throughout the term of the loan.
  • A repayment holiday of up to six months, which was only available once during the term.

Other financial support provided to businesses included:

Job Retention Scheme – Paid in the form of grants to pay 80% of the salaries of furloughed employees.

New Restart Grants – A one-off cash grant of up to £18,000 for businesses re-opening from April 2021, including pubs, hotels, restaurants, gyms, salons and clubs.

Business Rates Holidays – Business rates were cancelled for all retail, leisure and hospitality businesses for the tax year 2020-21 and up to June 2021, with a discounted rate for the remainder of the tax year.

Recovery Loan Scheme – This has replaced the BBLS and allows businesses to apply for between £25,000 and £10m. The government has given lenders an 80% guarantee for these loan repayments.

There have also been other schemes for different types of businesses, some made available through local authorities.

Commercial Finance Landscape Has Changed – Conclusion

COVID-19 has completely changed the landscape for commercial finance, particularly as the government has been compelled to step in to help save businesses from closure or building up unmanageable debts.

Lenders have been able to provide loans under the schemes with the security of knowing that the repayments are guaranteed by the government, which has helped them to continue providing finance to businesses when the risk to them is extremely high.

The success of the UK vaccination programme has already had a significant impact on economic recovery in the UK and the combination of this, along with the support that the government has provided will certainly have saved many businesses which otherwise would have gone into administration.

Experts are predicting that over the next few years should hopefully see a shift back towards the type of commercial finance products that were available pre-COVID, albeit with stricter lending criteria until we see a full economic recovery.

Commercial Finance Network is a specialist Commercial Finance Broker offering all types of commercial finance to SMEs along with individual investors. Get in touch today via either our Contact Form or call us on 03303 112 646.

Commercial Business Finance – The Rise of AI In The Banking and Lending Circles

June, 2017 archives: “Artificial intelligence can help people make faster, better, and cheaper decisions. But you have to be willing to collaborate with the machine, and not just treat it as either a servant or an overlord,” says Anand Rao, PwC Innovation Lead, Analytics.

The quote neatly sums up our relationship with AI technology. Although we appreciate its potential, we feel edgy about its power and possibilities. However, despite this, it’s pervading our lives as consumers, whether we like it or not. Every time we receive a marketing email or product recommendation, we can be sure the algorithms have been at work and we are far from the random target.

Despite its image of being cautious and conservative, the banking industry as a whole appears to have had few qualms about adopting the technology – and it seems that, as consumers, we are happy with this. A mammoth survey of around 33,000 consumers by Accenture found that more than 70 percent of us would be willing to receive computer-generated banking advice. “Automated servicing can be the sole source of data from some customers, even when making complex decisions around products,” says the report.

One of the main uses of AI so far has been in customer service. Chatbots are becoming the de facto alternative to banking apps. This use AI to simulate conversion through written or spoken text. Just as Amazon has humanised its digital assistant by calling it Alexa, so has the Nordic banking group Swedbank created ‘Nina’. This chatbot is clearly popular; within three months of being deployed, Nina was averaging around 30,000 conversations per month.

However, this is the sharp end of AI – the human/machine interface mainly used in the consumer-facing world of retail banks. But how does – or will – AI play out in a commercial finance environment?

The business sector is understandably more cautious, prudent perhaps, about adopting new technologies until they have matured. But as millennials take up more senior roles in the commercial banking world, they will be increasingly pushing for the rich functionality they know as consumers to also be integrated into their working environment.

Today, we are seeing signs that adoption rates of AI-based technology are set to take off in business banking too. More and more banks are borrowing retail banking experience to build out their commercial and business strategies. But while the focus of its use in the retail banking world has mainly been for customer service and sales applications, in commercial banking, use cases (initially at least) are likely to be more around streamlining operational processes.

In a sense, AI as it stands today, in this environment is all about automation, about making processes faster and more efficient. And there are a raft of applications here where automation is having a hugely positive impact.

Take the introduction of digital expenses platforms and integrated payments tools, both of which have the potential to significantly improve a business’s approach to how it manages cash flow. By having an immediate oversight, through live reporting of all spending from business cards and invoice payments, as well as balances and credit limits across departments and individuals, businesses can foresee potential problems more quickly and react accordingly. All these services become even more powerful when combined with technologies like machine learning, data analytics and task automation.

We are already seeing growing instances of AI and automation being used to streamline payment processes in banks. Cards can be cancelled or at least suspended quickly and easily and without the need to contact the issuing bank, while invoices can also be automated, to streamline business payments. This means businesses can effectively keep hold of money longer and at the same time pay creditors more quickly. Moving beyond straightforward invoice processing, intelligent payment systems can be deployed to maximise this use of company credit lines automatically.

Looking ahead, we see a string of applications for AI in the payments management field around analysing data with the end objective of spotting anomalies in it. With the short and frequent batches of payments data used within most enterprises today, it is unlikely that even the best-trained administrator would be able to spot transactions that were out of the normal pattern. The latest AI technology could be used here to tease out anomalies and pinpoint unusual patterns or trends in spending that could then be investigated and addressed.

While this area remains in its infancy within the banking and financial services sector, with technology advancing, financial services organisations and the enterprise customers they deal with will in the future will be well placed to make active use of AI that will help clients track not just what they have been spending historically but also to predict what they are likely to spend in the future. AI will ultimately enable businesses to move from reactive historical reporting to proactive anticipation of likely future trends.

Source: Russell Bennett, chief technology officer, Fraedom

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Is A Bridging Loan Right For You?

Like all financial products, bridging loans are more suitable for some applicants than others. For the most part, people tend to associate bridging loans with financing to ‘bridge’ the gap between property sales and purchases. In reality, a bridging loan can be used for pretty much any legal purpose whatsoever.

Bridging Loans: The Basics

One of the best ways of getting to grips with the basics of a bridging loan is to check out an online bridging loan calculator. Enter a few simple details, hit the button and learn how bridging finance works. See how rates vary in accordance with several key variables and determine your capacity to meet your repayment obligations, should you decide to go ahead.

Understandably, bridging loans are available exclusively for applicants aged 18 years or over. Open to private and business borrowers alike, bridging loans are almost always secured against the applicant’s property, which can be a commercial or residential building. Multiple properties may also be combined to cover the cost of a bridging loan, while some lenders will consider other valuable assets on a case-by-case basis.

Bridging loans can be particularly useful for borrowers with an adverse credit history, along with those who are unable to provide comprehensive proof of income. Just as long as sufficient collateral can be provided to cover the cost of the loan, the funds required can be made available in as little as five days. After which, it’s a case of repaying the loan in one lump-sum payment, anything from a few days to around 18 months later.

Bridging Loan Suitability Examples

Producing a definitive list of bridging loan suitability examples is difficult, given the enormous flexibility of bridging finance. Nevertheless, there are certain common examples and applications for bridging loans that make full use of their unique properties.

Examples of which include the following:

  • You intend to buy a property at auction and do not have sufficient funds on-hand to cover the costs. In such instances, applying for a traditional mortgage in the conventional way is simply out of the question.
  • A homeowner or developer wishes to finance extensive renovation, extension or home improvement works, in order to increase the market value of a property which will subsequently be sold.
  • The prevention of repossession, using a bridging loan to pay off an outstanding mortgage balance, prior to selling the property for its full market value, repaying the loan and retaining any additional profits made accordingly.
  • A business owner faces an unexpected financial shortfall, which calls for an immediate yet short-term cash injection. Bridging loans can typically be secured against a variety of business assets and commercial properties.
  • When a homeowner looking to relocate finds their dream property at an unbeatable price, but the sale on their current property hasn’t been finalised. They purchase the home of their dreams with a bridging loan and repay the balance in full when their former home is sold.
  • An investor or everyday buyer wishes to purchase a property a traditional mortgage provider refuses to finance. Examples of which could be partially-built properties or properties with major structural issues, which can be purchased quickly and affordably with a bridging loan.

These are just a few examples of some of the most common applications of bridging loans in private and professional circles alike. Across the board, bridging finance specialists are able to tailor their loans and associated terms to meet the exact requirements of each borrower individually. All with monthly interest rates as low as 0.5% — sometimes even lower!

Eligibility for a bridging loan is typically determined exclusively on the provision of acceptable collateral. Most of the usual measures like credit checks, proof of income and general financial history simply do not apply.

If you think a bridging loan is right for you, speak to an independent broker and organise a whole-of-market comparison, before submitting your application.

Source: Shout Out UK

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London house prices start to stabilise after three-year dip

Signs that London’s house prices could be starting to stabilise emerged this morning, with a new study showing that values picked up slightly in February.

According to Zoopla, househunters that have previously held off on deals are seeking out buying opportunities in the capital following weaker house price growth amid the Brexit uncertainty.

The property portal said that “while market conditions remain weak, there are signs of a pick-up in demand following a 3-year house price re-correction of London homes”.

The rate of London’s annual house price growth picked up modestly in February, climbing 0.4 per cent when compared with the same month in the previous year.

The number of London postcodes registering a fall in house prices also dipped from 69 per cent in October to 55 per cent in February.

Every city in the UK registered a rise in house prices in February for the first time since 2015.

The city which saw the sharpest year-on-year rise in house prices was Leicester, which registered a 6.8 per cent bump in values over the 12 months.

Richard Donnell, research and insight director at Zoopla, said that there was a “greater realism on pricing by sellers”.

Donnell added: “With unemployment at a record low and mortgage rates still averaging two per cent, buyers appear to be largely shrugging off Brexit uncertainty until there is a material change in the overall outlook.”

Yet today’s figures come despite a swathe of recent data showing that activity in the capital’s housing market has largely continued its downward trajectory in recent months.

House price rises in January fell to 1.7 per cent across the UK, according to recent Office for National Statistics (ONS) data, with London recording the lowest annual growth out of any region.

The Royal Institution of Chartered Surveyors (Rics) also warned recently that uncertainty over Britain’s imminent departure of the EU is likely to damage the UK housing market over the coming months.

By Sebastian McCarthy

Source: City AM

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House prices up 2.8% over the last year

Leicester and Manchester have recorded price growth of 17% since the Brexit vote in June 2016, followed by a 16% increase in Birmingham, Zoopla’s UK Cities House Price Index has found.

The index, powered by Hometrack, found prices have been rising by 5% or more in seven cities led by Leicester, Manchester and Glasgow.

Andy Soloman, founder and chief executive of market researcher Yomdel, has found: “Extremely positive to see the larger, economic hubs of the UK all clock up some positive mileage so early in the year where price growth is concerned.

“I think we’ve now seen a shift in mentality amongst both buyers and sellers who realise if they do wish to sit on the fence until Brexit is finalised, they could be there quite some time.

“As a result and much like Brexit, people just want to get on with it now and sellers are adjusting their price expectations in line with the current market climate, while buyers are taking the plunge and proceeding with a purchase.

“This uplift in demand and market activity has stimulated the market and provided the first concrete signs of a pulse after running on life support for quite some time.”

This is the first time annual price growth has been positive across all 20 cities for 3.5 years, since August 2015, primarily a result of growth finally turning positive in Aberdeen.

Average house prices increased by 2.8% over the last year,Annual price inflation ranges between +6.8% in Leicester to +0.2% in Cambridge.

The annual rate of growth in London has increased slightly to +0.4%. While market conditions remain weak, there are signs of a pick-up in demand following a 3-year repricing of London homes.

This repricing process has come in two forms, absolute price falls which have been concentrated in higher value markets, and a widening in the discount between asking and achieved prices, with the largest discounts in inner London.

Our granular house price indices for London reveal that the proportion of postcodes registering price falls is starting to reduce.

The latest data reveals that prices are falling across 55% of London postcodes, down from almost 70% last October.

The rate at which prices are falling in these markets is relatively low – 0% to -5%. Prices continue to increase in 45% of London City postcodes, typically lower value, more affordable areas in outer London.

Buyers who have delayed purchases and stood on the side-lines since 2015, are starting to see greater value for money, perhaps seeking out buying opportunities while Brexit uncertainty impacts market sentiment.

While London has registered weak growth, regional cities outside southern England have recorded above average price inflation over the last three years. This is a result of better affordability and rising employment which has boosted demand.

The rate of price inflation in regional cities has started to moderate. Hometrack prediction this will continue over the remainder of 2019 and Birmingham and Manchester to start to lose momentum.

Its granular price indices for Birmingham and Manchester, found a significant increase in the proportion of postcodes registering growth of 0% to 5% and fewer areas recording growth over 5% per annum.

This is a result of growing affordability pressures as well as increased uncertainty. We expect prices to keep rising in these cities but at a slower rate, closer to earnings growth.

This follows the pattern recorded in cities such as Bristol and Bournemouth in southern England.

Brexit uncertainty is often cited as the cause of weaker house price growth over the last 12-18 months. Hometrack said it is more complex than that and sees Brexit uncertainty as a compounding factor in markets where fundamentals have weakened.

Price growth is just one measure of relative market strength. Levels of housing transactions are another important measure for businesses operating in the market. The willingness and ability of households to move home underpins revenues and business plans.

Data on transactions remains resilient with no obvious Brexit impact at a national level. Transaction volumes over 2018 remained in line with the 5-year average. The same is true for mortgage approvals for home purchase.

There has been no material drop in activity over 2018H2 as the Brexit debate has heated up. The very latest data from HMRC showed that housing transactions have increased slightly in the first two months of 2019.

With unemployment at a record low and mortgage rates still averaging 2%, buyers appear to be largely shrugging off Brexit uncertainty until there is a material.

By Michael Lloyd

Source: Mortgage Introducer

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Expert Panel Unanimous on Future Optimism in UK Housing Market

A panel of experts were unanimous in their belief that there are grounds for optimism in the UK housing market over the next five years, at an opening debate for the Landlord Investment Show 2019 in London Olympia.

The Landlord Investment Show 2019 kicked off at Olympia London on March 21st, commencing with a government panel debate hosted by publisher and broadcaster Andrew Neil. The debate ranged over a wide variety of pertinent topics, such as Brexit and housebuilding, as well as the obstacles homeowners and landlords currently face.

The panel’s three expert panellists were unanimous in voicing optimism for the UK housing market over the next five years, with some of them believing market fundamentals to be strong and supportive, despite apparent political uncertainty in the present.

The panel consisted of four guest speakers, including Iain Duncan Smith MP; Sarah Davidson, knowledge and product editor of This is Money; Paul Mahoney, founder and managing director of Nova Financial Group, as well as Tony Gimple, founder of Less Tax 4 Landlords.

Mr Duncan Smith, former leader of the Conservative party, used the debate as an opportunity to voice his concern about housing policies implemented in recent years. He believed former Chancellor of the Exchequer George Osborne’s economic policies “had led to landlords scaling back or even leaving the sector entirely”.

Strong turnout at Olympia

As many as 4,300 guests attended the National Landlord Investment Show in Olympia last week. Following the positive verdict on future sentiment in the housing market from the guest panellists at the opening debate, attendees were invited to a variety of seminars, including a special Brexit seminar.

The subject of Brexit was no doubt at the forefront of the minds of many attendees, especially following the developments of preceding days in Westminster. However, Brexit was not the only topic for people to talk about at this year’s event.

Attendees were also invited to attend seminars on the subject of opportunities and threats in the property market for the year ahead, as well as a legal debate chaired by Paul Shamplina, founder and director of Landlord Action. The legal debate centred on topics of great interest to the audience, including the subject of buy-to-let, as well as the private rental sector.

Opportunities for forging new connections

For budding investors keen for some further insights on the subject of buy-to-let, there was a seminar on the subject of being a beginner in property, hosted by a representative from the Property Investors Network.

Buy-to-let proved to be a topic with much coverage during the day, with talks including a morning seminar on the subject of buy to let property investment fundamentals, mistakes and changes, by Paul Mahoney, as well as an educational seminar on how to finance buy-to-let property, held by Jeni Browne, Sales Director at Mortgages for Business.

There were as many as 88 stands erected at the venue for the occasion, giving plenty of opportunities for guests to delve into intriguing ventures and make new connections. Despite the recognition of an overall slowdown in the housing market in the first few months of 2019, National London Investment Show at Olympia was a hive of activity, with attendees showing great keenness to explore new opportunities for the year ahead.

Source: Property118

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ASTL members up lending by 39% year-on-year

Association of Short Term Lenders firms (ASTL) increased the value of bridging lending by 38.9% in the third quarter of 2017 compared to the same quarter in 2016.

However lending saw a small fall of 2.7% from the second quarter of this year.

Benson Hersch (pictured), chief executive of the ASTL, said: “The figures from our members show that the bridging finance industry is in excellent shape.

“It shows that the industry has remained resilient despite the threat of Brexit and low growth in the economy.

“The figures also demonstrate that bridging loans remain an excellent alternative where traditional financing is not immediately available for customers.

“The bridging sector therefore continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way.”

The value of their loan books stand at £3.5bn after rising by 27.7% from the end of Q3 2016 to Q3 2017.

Source: Mortgage Introducer

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Bridging loan volume dips in Q3

Bridging volumes fell by 4.9% in Q3 but remain some 2% higher than last year, data from Bridging Trends has shown.

The firms that contribute to Bridging Trends reported that gross lending had dropped to £142.75m

The split between first charge and second charge lending stood at 82% and 18% respectively indicating consistent investment in residential properties-to-let.

And Joshua Elash, director at MTF, said in regards to unregulated bridging continuing to dominate the landscape: “The implementation of the Prudential Regulatory Authority’s rules relating to the treatment of portfolio landlords means this upward trend is likely to continue for the foreseeable future.

“Increasingly larger number of professional property investors will consider bridging finance when purchasing a new property which they otherwise intend to refurbish and sell.”

Chris Whitney, head of specialist lending at Enness Private Clients, added: “I think when you keep in mind the fact that this was over the summer holiday, a drop of only about 5% in lending volumes compared to the last quarter is actually quite impressive.

“I was surprised the average interest rate hadn’t fallen further than it has. We have seen pricing under quite a bit of downward pressure as certain lenders fight to increase market share and protect what they already have from new entrants.”

Additionally the data found that mortgage delays were the most popular reason for taking a bridging loan and the average duration of a loan stood at 12 months.

Average LTV levels reached almost 50% with the average monthly interest rate across first and second charge lending decreasing to 0.82% from 0.84%.

Source: Mortgage Introducer

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Five ways to harvest sustainable UK income

Since the financial crisis, investors and savers have seen meagre yields from cash and gilts, with rates anchored at historic lows.

For investors accessing markets to extract additional income, it is more important than ever to navigate stretched valuations across many asset classes. Furthermore, investors must carefully consider the sustainability of income generated from equity and fixed interest investments.

Despite mounting doom and gloom over the UK economy, the outlook for dividends remains sound, recently buoyed by the rapid pound depreciation, which has benefitted overseas earners. Investors should remain wary of dividend concentration, but the UK will continue to be a strong and reliable long-term source of income.

Taking a long-term, value-driven approach, here are five income opportunities in equity and fixed interest markets:

Value opportunities in unrated gems

We have maintained a large exposure to unrated and subordinated debt, mostly in the form of preference shares and Permanent Interest Bearing Shares (PIBS). Just because these types of instruments don’t have a credit rating, does not make them low quality. There are plenty of companies which have taken the decision not to pay for a credit rating and are considered robust businesses – John Lewis a good example.

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Insurance company preference shares are a neglected and under-researched area of the market. It is permanent capital for these companies and can provide a rich seam of value and additional yield – for example Royal Sun Alliance, Aviva and General Accident.

Separating the casino from the utility in UK banks

We carried a large underweight to UK banks since the crisis. UK banks entered the financial crisis with very low capital ratios, found dubious ways of complying with Basel III requirements and were, by and large, an ethics-free zone. Furthermore, many banks continue to be encumbered with high-risk investment banking operations. When investing in banks, it is important to separate the casino from the utility.

A decade on, we have seen positive developments among some UK banks, in terms of restructuring and regulatory scrutiny. Following a period of close analysis, we recently took a position in Lloyds – our first domestic UK bank since the crisis. It is a relatively low-risk bank, with 95 per cent of its lending book exposed to the UK and a 25 per cent share of the UK’s current account market. Lloyds is also trading at a historic low – well under half of its pre-crisis share price.

Rock-solid insurance companies

Most of our financial exposure is in insurance, where solvency ratios have been rock solid.  While low interest rates are a drag on performance, we can expect this to turn into a tailwind when rates slowly lift. Strong names in this space include General Accident and Legal & General.

Strong real yields in commercial property

Commercial property also looks solid value. Since the crisis we have seen low levels of property development and vacancy levels remain close to record-low levels. Yields are a very robust 4.5-5 per cent, while rental growth remains positive driven by strong tenant demand. Property rents tend to keep pace with GDP growth over the long-term, so it can be argued this is a 4.5-5 per cent real yield. Picton Property and Londonmetric Property are great ways to gain exposure to this asset class.

Look to Asia’s growth engine

China looms large in the Asia region and for good reason – it is Asia’s growth engine. Every few years we hear a scare story about China – the currency devaluation being the latest – but its economy remains resilient.

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The service sector is faring well and consumer sentiment is strong. GDP growth of 6-8 per cent looks achievable to support a more balanced and transitioning economy. While the obvious cheapness has evaporated, Asia remains attractive on a relative global basis. We are currently invested in the region through HSBC, which earns most of its profits in Asia – as well as local companies such as dominant telecom China Mobile. Both yield more than 5 per cent.

Source: Money Observer

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Bridging in probate

Bridging loans are incredibly flexible and may be put to a variety of uses including resolving probate issues when concluding a will.

When a will is presented between various parties, it can throw up financial hurdles. There are numerous benefits to be gained by fast tracking the settlement process and using a short-term finance solution to meet resolution.

Annual bridging lending grows for third consecutive quarter

By using bridging, beneficiaries of a will are able to pay legal fees and inheritance tax straight away, releasing 70% of the value of the property immediately without making any interest payments which are covered by the loan facility.

This ultimately allows the beneficiary to market the property for a longer period of time to maximise its value which will be far greater than the interest payments on a bridging loan, rather than discounting the property for a quick sale or through auction.

Resolving debts

Carrying out someone’s will is not always as straightforward as we might like. Although the ownership of their various assets might be easy enough to resolve, the average person will take on a network of debts and credits which must be resolved in their will.

Bridging finance offers a person’s family some breathing space and they can use the loan to pay off debts instead of being forced to sell assets as quickly as possible. Bridging lenders are also highly flexible and quick to put solutions in place. There’s no red tape and it’s possible to create a loan structure that’s perfectly suited to individual circumstances

In many ways, a bridging loan for probate finance is very similar to a standard bridging loan. The loan will generally be for a short fixed term, commonly less than 12 months (though longer terms are available), and can be of any value from tens of thousands to tens of millions of pounds.

Inheritance tax

When concluding a will, beneficiaries will inevitably face tax implications which must be factored into the overall process. Again bridging can help streamline and manage this inevitable challenge by providing a quick fix solution.

Many estates in the UK become liable for inheritance tax, which must be paid within six months and typically a 40% share of the estate upon liquidation. Again, this financial pressure can be eased through the use of bridging finance, as it enables the will’s executors to restructure and refinance to meet the cost of inheritance tax.

Conclusion

Without bridging finance it would be very difficult to resolve the financial affairs that can be brought about in a deceased person’s will.

The time pressures that quickly become apparent would require that many estates be quickly broken down and sold, rather than being realised at their full value. Bridging loans are therefore a helpful tool that enables individuals to pass on their wealth through generations, and allows inheritors to benefit more from their parent’s estates.

Source: Mortgage Introducer