Covid-19 has changed the lending market

The lockdown period has proven to be a trying period for the property sector. With the UK Government actively discouraging people from moving property, lenders, borrowers, agencies and brokers were placed in a precarious position. Short-term relief measures were introduced to support those affected, but the lack of certainty made it incredibly difficult to prepare for the future.

Finally, it looks as though things could be returning back to relative normality. I say relative because we still do not know when social distancing measures will be lifted entirely. Some people are more confident than others, and while the number of cases is dropping, there is nothing to say a second outbreak is completely out of the equation.

Looking to the property sector, mortgage providers who initially retreated from the market are making a slow return. People can once again move properties and there has been a notable spike in interest for bricks and mortar. We are moving forward, though it would be wrong to assume that things will simply return to the ways they were. Rather, I believe the coronavirus pandemic has fundamentally transformed the lending market, and for the better.

In times of adversity, businesses are forced to think on their feet and be creative. Some may succeed, while others can fail. In light of this, I believe COVID-19 has forever changed the way brokers and property investors engage with lenders, particularly when it comes to specialist finance.

Greater flexibility and bespoke solutions

When the implications of COVID-19 were realised, it became immediately apparent which businesses were prepared and which were not. The prospect of working online and out of the office compelled some lenders to transform their CRM systems, and develop solutions to ensure loans could still be processed and deployed. This has been true for bridging loan providers and those offering specialist finance.

Big banks and mortgage providers, on the other hand, have struggled.

The decision to freeze new applications and take certain products off the shelf placed existing transactions at risk of falling through. As a result, brokers and borrowers have been engaging with bridging lenders to ensure transactions can continue. In turn, there is now greater market awareness of specialist finance and why it should be deemed a credible alternative to mainstream loan products.

Brokers and borrowers want flexibility and lenders committed to meeting the requirements of each individual case, and specialist lenders have shown they can step up to this challenge.

Consolidation of the specialist finance market

Prior to 2020, there had been notable increase in the number of new lenders entering the market. Competition was increasing, leading to many lenders reducing their rates and fees. For a time, this was beneficial for brokers and borrowers. However, there was growing concern over whether such competition was sustainable in the long-term.

Importantly, the challenges that have come about as a result of COVID-19 is leading to a consolidation of the market. By this, I mean it is testing the capabilities and expertise of lenders. While some have struggled, others have been able to readily adapt to these new market conditions. In the end, it is creating a market of lenders who are experienced and have the foresight to plan for sudden shifts in the market. This will ultimately benefit borrowers and brokers, giving them solace knowing they are engaging with industry-leading lenders.

The future is looking positive, but we should always be weary of what lies on the horizon. Importantly, the coronavirus has permanently transformed the way lenders operate, and this will ultimately be to the benefit of brokers and borrowers in need of tailored and fast loan solutions. Real estate remains an asset in high demand, and so long as this is the case, there will always be a need for creative finance solutions. Read our report “Transitioning out of lockdown: preparing for the new normal” to learn more about the impact of Covid.

bridging loan for auction properties

Contact us

Speak to us on the phone, via chat or email about your case, however complex it might be. We have a friendly, dediciated team and one of our underwriters will be happy to help you with your query. We will try our best to say yes to you, instead of finding a reason to say no.

Discover more Articles

Menu