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Pensioners seeking payday loans almost double in two years

The number of people aged over 65 applying for payday loans has almost doubled in just two years, according to new research.

Figures from short-term credit broker CashLady revealed a 95 per cent increase between 2015 and 2017 in the number of pensioners turning to short-term financial help to top up their monthly pension.

The average monthly income of older people applying for these loans went up by £157, from £1,478 to £1,635, in the same period.

Despite a 10 per cent rise in monthly income, the research revealed the loan amount requested had increased by 26 per cent – suggesting pensioner income is struggling to keep pace with the rising cost of living.

In the space of two years, the average amount individuals applied for has increased by £80, from £302 in 2015 to £382 in 2017.

Chris Hackett, managing director of CashLady, said these figures suggest there were more and more older people living off their pensions yet struggling to make ends meet.

He said: “Inflation has been stuck at a high level for the last five years and while pensions have gone up, the shortfall between income and the cost of living is becoming increasingly apparent.

“The challenge for many of these applicants is our lenders will only approve loan applications if the person is in employment, which effectively rules out short-term loan options for those already retired.”

Earlier this month, research from the Pensions Policy Institute (PPI) revealed millions of people were almost completely reliant on a basic state pension of just £7,000 a year to pay their bills and live in retirement.

The report showed that for the poorest pensioners, £3 in every £4 of their income comes from the state pension.

The poorest pensioners are also seeing the lowest rise in income, since pension credit is set to increase by less than the state pension next April.

Paul Gibson, managing director of Granite Financial Planning, said he was surprised with the research results.

He said: “I don’t think most financial advisers clients would typically fall into this category and none of my retired clients have any borrowing requirement.

“Whilst the data may be accurate the annual percentage rate quoted on CashLady website of 1,272 per cent is quite staggering. It seems to be akin to putting petrol on a fire to try and put it out.

“If people are genuinely struggling I would hope there are better ways to cover this short-term debt, but high street banks’ lending criteria has now become so restricted they are not helping the problem as perhaps they should be.”

Source: FT Adviser

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Bridging set for another boost – London Credit outlines why 2018 looks set to be another excellent year for the bridging finance sector

Bridging finance continues its rise as a truly effective funding option. Industry bodies have reported a record year in 2017 and the indicators show that this is set to continue this year, still playing a vital role in helping to fund property renovation and change of use. With the supply of rental property still in high demand, short-term finance has an ever-increasing role to play in easing the housing crisis and supplying businesses with much-needed funding to expand their premises.

The demand for bridging finance doesn’t seem to have been dampened by several legislative changes to the buy-to-let market: more stringent affordability tests, tax relief and stamp duty rules were all introduced last year, but the demand for bridging has remained strong.

Even the PRA rules, which mean that landlords with four or more buy-to-lets need to submit details of their existing mortgaged properties, haven’t dampened demand. Now that the new rules have had time to settle in, we’ve seen a steady stream of enquiries from portfolio landlords for blocks of flats for student accommodation and HMOs for young professionals. This is particularly important in major cities where rental accommodation is at a premium, as house purchase is still a pipedream for many, despite the stamp duty relief for first-time buyers in the Autumn Budget.

The purchase price of a property is a key factor in determining yield for a landlord and, depending on the amount of renovation needed, can help keep the costs down. As long as the property is rented out at the market rate for that area, higher yields could result.

Auctions remain a good way for investors to acquire property at a competitive price, often below market value, and 2017 was another positive year for auction sales. Landlords and developers are snapping up residential rental and commercial units, particularly when work is needed on the property for either refurbishment or change of use. At an auction, completion needs to happen quickly, often within 28 days, so bridging finance is the ideal way of making this happen.

It’s vital that developers get a fast turnaround, so they can start work on the property as soon as the funding is in place, allowing them to shorten the time it takes to get the property on the rental market. To exit the bridge, some of our clients refinance to a longer-term loan with a more traditional lender or sell the property at a profit.

In short, the bridging finance sector is in great shape, and despite legislative changes and Brexit uncertainty, it’s proved to be resilient to such factors. There is a range of lenders servicing a variety of funding types and loan sizes, with more alternative products on offer than we’ve seen for many years. Short-term finance offers a real alternative to mainstream funding sources and bridging remains one of the best ways to act quickly when opportunities arise. It looks set to remain just as popular in 2018.

Source: PR web

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Are UK bridging lenders eyeing US expansion?

The US market would appeal to many bridging lenders if they were to consider international expansion, a recent report uncovered.

The EY 2018 UK Bridging Market study revealed that while the primary route to expansion was geographically in the UK, the US market appealed to many bridging lenders due to being able to offer a similar product proposition and there being capacity to grow quickly.

In the US, bridging loans – or bridge loans – are sometimes referred to as hard money loans.

Hard money lenders tend to be regulated at a state level via the department of real estate and at least one person associated with hard money lending is said to need a valid real estate broker licence.

Additional licensing requirements may vary from state to state.

Why might the US appeal to UK bridging lenders?

“UK bridging lenders would naturally consider lending in the US market because there is a limit to the amount of capital that can be deployed in the UK and the US market is so huge, it’s natural to want to consider operating there,” explained Michael Dean, principal at Avamore Capital.

“The US is also very creditor-friendly compared to most of the rest of the developed world, much like England and Wales.”

Paul Riddell, head of marketing and communications at Lendy added: “The US bridging market is an attractive market for many UK-based lending businesses.

“We are a fast-growing platform so clearly we would not rule out expansion into new markets over the longer term, with the US being a good fit for our model.”

Rob Jupp, CEO at Brightstar, pointed out the opportunities left by the global economic crash.

“There are huge opportunities to make significant profit from property appreciation in the US and a real shortage of a short-term lending industry to facilitate this.

“It’s almost the perfect environment for UK lenders, if partnered correctly.”

Jack Coombs, director at Aspen Bridging
Jack Coombs, director at Aspen Bridging

However, Jack Coombs, director at Aspen Bridging, told B&C that while the US was interesting as it had few legal barriers and a similar language, it was “a bit obvious”.

“There are possibly more attractive opportunities in other yet less developed bridging markets while still within the OECD countries.”

What problems could UK bridging lenders face in the US?

“Because there is a lot of UK competition in a shrinking market, some lenders may perceive that with the US being a large market that there may be room for more,” pointed out Damien Druce, director and head of intermediary sales at Assetz Capital.

“Unfortunately, for most with this aspiration, there are established lenders in the US that investors would be more likely to back.”

Chris Whitney, senior broker at Enness Commercial, wasn’t convinced the US market was suffering from any shortage of short-term specialist debt providers.

“The UK has a more robust legal system, mature regulatory framework and excellent infrastructure, and we know people choose to come here to transact business for these reasons.

“We’ve seen many US- and Canadian-backed funds wanting to lend into our market because of this, but rarely the other way around.”

Adam Tyler, chairman of FIBA, said that while there had been some success for P2P lenders expanding into the US market, there were few independent UK bridging lenders with the resources to make the same entry at present.

“Having worked closely with my US counterparts in recent years, while there is familiarity in terminology and outlook, it would not only require a significant amount of research, but also some serious financial backing to help build a recognisable brand.

“A partnership with a US-based firm with existing distribution might be a better path.”

Ortus Secured Finance has entered new markets recently, including the Republic of Ireland, but ruled out an expansion into the US for the time being.

“A huge amount of research and due diligence is needed to sensibly enter a new market, along with a strong, local professional network,” said Jon Salisbury, managing director at Ortus.

“Therefore, an expansion into the US is not on our agenda at the moment.”

Michael explained that the US market was quite fragmented because the recovery of loans varied from state to state, with each having different rules.

“From what we’ve heard, foreclosure is very easy to achieve in California, whereas in New York state, Florida and New Jersey it’s much more difficult to achieve and can take a lot longer, so you need a lot of local-level knowledge to support your expansion plans.”

Mike Strange
Mike Strange, managing director at Funding 365

Mike Strange, managing director of Funding 365, added: “The US financial services market is exceptionally sophisticated and already has a comprehensive bridging offering.

“I think it is unlikely that a UK bridging company is going to be able to compete with US peers given the inherent barriers to entry that exist.

“The US market has always been viewed – across many industry sectors – as a market which can provide untold riches if conquered.

“The truth is, however, that the path to US market success is littered with the remains of companies which tried and went bankrupt trying to succeed there.”

Source: Bridging and Commercial

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Brokers confident for 2018

Brokers are confident about the state of business and the wider economy in 2018, two pieces of research indicate.

Bridging lender mtf found that 68% of brokers believe overall market conditions will improve in 2018, compared to 31% in the same period the year before.

Meanwhile Shawbrook Bank found that 78% of brokers are fairly or very confident about the lending environment as a whole and 69% are fairly or very confident about their business growth

Furthermore, about half (49%) are about the UK economy post Brexit.

James Anderson, head of new business at mtf, said: “After the challenges faced in 2017, it is encouraging to see that brokers’ confidence is strong as we enter the New Year.

“I’m delighted that brokers see the demand for a growth in bridging finance in 2018 and the reasons are simple.

“Bridging loans provide a real-time solution to the funding gap that has developed as high street lenders come to terms with increased regulation. We can continue to expect to see a substantial rise in the demand for bridging finance throughout the rest of the year.”

The brokers surveyed said macroeconomic uncertainty will be the main challenge for UK financial services firms in 2018, while 28% cited the impact of Brexit negotiations, mtf research shows.

Some 13% said the level of market competition would be the biggest challenge. Only 6% of brokers thought regulation would prove a challenge.

Most (84%) brokers are preparing for a further rise in bridging finance volume in 2018, after 73% of those questioned reported an actual rise in bridging loan volumes in 2017.

However Shawbrook found brokers see lending restrictions, regulatory change and valuation issues as the biggest challenges their businesses.

Some 61% of brokers surveyed believe that their portfolio landlord clients are aware of the PRA rule changes but do not understand all the changes.

They said the knock on effect of the PRA/FCA regulations was likely to be the biggest issue facing their clients in 2018.

In addition, 59% of brokers surveyed believe that their HMO landlord clients are not aware of new licensing laws that may come into effect next Spring.

Source: Mortgage Introducer

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Why small (but growing) is beautiful

2017 was a momentous year for bridging, with annual lending breaking through the £3bn figure for the first time. But before we get carried away, we need to bear in mind this is equivalent to only around one 19th of the residential mortgage market.

By its very nature, bridging is a niche lending market – although it has shown a remarkable ability to adapt and thrive, providing solutions to new market needs in recent years. For property refurbishment in particular, the options now available to developers are far more widespread and competitive.

Who in the mainstream market, would have thought a decade or so ago that bridging would have proved such a socially useful form of lending, enabling empty and neglected property to be brought back into use, and supporting entrepreneurship?

Yet here we are, and I am excited about where the future might lead us.

Gone are the days when the only awareness that people had of bridging finance was in managing the mismatch of timing in the sale and acquisition of two disparate assets.

Now, there is a growing recognition that short-term finance can bridge not just a timing gap, but other gaps as well – the risk appetite gap, for example (especially as far as big banks are concerned following the global financial crisis).

Occasionally, though, I hear rumblings of concern that the bridging market is growing too fast, and risks stoking problems rather than solving them. I also hear concern about the fact that too few intermediaries operate across boundaries – brokering both short term and long term borrowing solutions for their clients.

On the first point, I see little evidence of difficulty. If anything, short-term lenders are more acutely risk aware than their long term counterparts, as the impact will hit them sooner and harder if their customer cannot repay as planned.

As long as sensible due diligence is conducted and the client has a clear exit route, if the demand is there it makes sense to meet it.

As for the second point, I have a degree of sympathy. There are still only a relatively small number of brokers who engage with bridging, with few mainstream brokers considering this as an option – although this number is growing. Holistic advice, and access to the widest possible range of solutions, must always make sense from the client perspective.

One of the benefits of being part of a growing market is the increasing likelihood of forming part of the suite of options on offer. I’m sure it is only a matter of time until more brokers realise it makes sense to look at all options and this in turn will lead to the further growth of the bridging market

As we look ahead, there will be an increasingly fuzzy boundary between products, yet an increasingly clear expectation on the part of clients that their advisers will have all available options at their fingertips. It’s clear that bridging has now earned its place among those options – and that can only be a good thing.

Source: Mortgage Introducer

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A number of bridging lenders may target business sales in two to five years, claims new report

A number of bridging lenders could be looking to sell up over the next two to five years, according to a new UK bridging market study.

The report ‘A View for 2018 and Beyond’ from the Ernst & Young (“EY”) Financial Services Corporate Finance team includes the results of a survey conducted with 11 key bridging market players.

It also highlights recent trends and provides a view on market trajectory.

“One of the reasons for producing this market study is that many bridging lenders are targeting a sale of the business in the next two to five years, although currently few are up for sale,” explained Jordan Blakesley, senior manager in the EY Financial Services Corporate Finance team.

“We wanted to use our insight to create a report for the market that helped businesses shape their strategic direction.”

The survey showed that many respondents expected the number of players in the bridging market to decrease over the next few years due to competition forcing some players without unique selling propositions to exit the market, larger existing players organically growing and diversifying into other markets and smaller lenders being acquired by larger ones.

Stuart Mogg, director in the EY Financial Services Corporate Finance team, explained to B&C that while consolidation meant fewer players, they would be “highly profitable” with improved funding terms and potential for greater product innovation.

Stuart added: “There has been a good funding market for the bridging sector over the last couple of years, which has supported the growth of the larger players.

“As a result, we are starting to see a polarisation of the market and it has become clear that smaller players need to do something strategic to compete and achieve greater scale.”

Speaking to B&C, Rob Jupp, CEO of Brightstar said: “EY are seen as the most prolific deal makers in the UK speciality finance sector and any predictions that they make in this sector are generally spot on.

“Short-term lenders have attracted interest from a broad church of investors for quite a while now and I would expect to see the ‘best in class’ generating the environment that will allow for a number of significant capital events in the months and years ahead.”

The research indicated the strategic routes available for lenders within the markets that they were aiming to grow.

These included selling, merging, expanding overseas, buying a broker, exiting the market and expanding product ranges.

According to survey responses, the US market appealed to many bridging lenders if they were to consider international expansion due to there being capacity to grow quickly. The report stated that most lenders discounted Europe because of more customer-friendly legal systems and language barriers.

The study also explained numerous debt and equity funding options and how a lender would need to prepare for such a transaction.

The EY bridging market study can be viewed online.

Source: Bridging and Commercial

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Bridging market: Six predictions for 2018

The bridging market enjoyed a solid performance last year, after achieving gross annual lending of £4.7bn in Q3 2017, according to a recent study.

The West One Bridging Index report found that gross annualised lending increased from £4.3bn in June to exceed the peak of 2016’s pre-EU referendum high of £4.4bn, with the figure up 10% on the same period in 2016.

What do we expect to see from the bridging market in 2018?

Richard Tugwell, director at Together, said: “The Intermediary Mortgage Lenders Association (IMLA) described in its October white paper a ‘rebirth’ for the specialist lending market, following its impressive growth, particularly in the bridging finance sector.

“We fully expect this situation to continue throughout 2018, as high street finance providers shuffle their propositions, meaning an even greater number of borrowers will be unable to access the short-term funding they need.

“This growing demand will provide greater opportunities for specialist lenders like Together to highlight a more tailored service – relying on personal decisions, rather than a computerised approach – to deliver the best outcome for the customer.

“In 2018, we will be forging even stronger relationships with brokers so that – as rates start to move and customers’ deals come to an end – we will be able to help even more who are looking for bridging finance, but who may not fit mainstream criteria.”

Paresh Raja, CEO at Market Financial Solutions, believed that 2018 represented a significant opportunity for bridging to further establish itself as an attractive funding option.

“As clarification is obtained as to what Brexit will mean for the UK, it is foreseeable that greater confidence will return to investors.

“Subsequently, as 2018 progresses, the housing industry could once again return to more substantial patterns of growth, which may spark a rise in real estate investment [and], therefore, bridging demand.

“Apart from the South East and London areas, demand for bridging will also rise in other cities such as Manchester, Liverpool, Leeds and Birmingham, which continued to perform extremely well in 2017 and property investors will continue to tap into this sustainable growth.”

Gavin Diamond, commercial director of bridging at United Trust Bank (UTB), added: “The bridging market continues to go from strength to strength, with UTB seeing a record number of cases in 2017.

“2018 is already off to a busy start and there’s nothing to suggest there will be any let up in activity in the short-to-medium term at least.”

Jonathan Sealey, CEO at Hope Capital, believed that flexibility would be key for bridging this year and there was no room in the market for the ‘one-size-fits-all’ approach.

“Lenders need to be flexible and treat every borrower in accordance with their individual needs.

“The prospects for lenders from developers seeking finance will increase as the government moves on its plans to get the country building.

“The land that has been sitting waiting for development will have to [be] built upon, which means developers may need funding sooner than they might have initially thought.

“Short-term finance could come into its own to give developers room to move from one project to another.

“We saw an increase in applications at the end of 2017 for loans for renovation and refurbishment.

“This is a trend that I can see continuing this year as more people – especially landlords – look to improve their current position and increase the value of their existing properties.”

Narinder Khattoare, CEO at Kuflink Bridging, commented: “The bridging market is coming off a hugely successful 2017 and pipeline business going into January is the best that we at Kuflink have ever seen.

“Certainly, industry figures from a variety of sources show the continuing growth of the sector and I expect that trend to continue in 2018.

“Development and refurbishment loans will be growth areas this year and with the news in the cabinet reshuffle that housing – and by extension the property market – is now represented at cabinet level, I am confident that the chancellor’s plan to make housebuilding a priority will actually bear fruit.

“This can only lead to greater opportunities for advisers with clients associated with the building trade over the next few years.”

Allegra Penny, relationship manager at Funding 365, also expected the bridging market to continue its growth in 2018.

“I predict continued growth in investment outside of London as stamp duty continues to bite, but I would imagine this would be at a slow rate.

“Now we have moved into the second phase of Brexit, there is still much uncertainty and until we know more, this will continue to have an adverse impact on the property market.

“Finally, moving into 2018, I think we will see continued innovation and competitive offerings within the industry and at Funding 365.”

Source: Bridging and Commercial

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A look back at the short term lending market for 2017

2017 was preceded by a long spell of huge growth and this year is no different, but it hasn’t been without a few bumps in the road. The sector suffered a short period where business levels dipped following the referendum, and again after the rate rise, but quickly bounced back on both occasions demonstrating its resilience and ability to adapt.

There have been many new entrants to the market, with a particular focus on the heavy refurb and development markets; this is largely down to the extension of permitted development rights. The rise in refurbishment lending could also be indicative of an increase in desire to improve existing properties rather than move, coupled with the lowest mortgage approval rate on new homes for over a year. Another reason for growth could be that mortgage delays continue to be the leading reason for the use of short term finance.

Overall, there has been a lot of liquidity in the market with fierce competition which has driven rates down even further. The lowest available rate is currently 0.44% pm and the most competitive we’ve ever seen.

Short Term Lending product of the year

This year, Interbay, part of One Savings Bank launched in to the short term lending market. Brightstar were fortunate enough to be selected to trial their product with a headline rate of 0.44% pm. This offers non-regulated clients the ability to benefit from the UK’s most competitive short term lending rates, starting at just 5.28% PA for loans up to 55% LTV.

The product can also be used for property requiring light refurbishment.

The LTV brackets are 0.44% up to 55% LTV, 0.54% up to 65% LTV, and 0.64% up to 75% LTV.

All LTV brackets carry a 2% fee with no exit fee or ERC.

Source: Financial Reporter