D’mitri Zaprzala

The market opportunity has never been better for specialist lenders




Assessing the state of the UK property lending market can be a bit of a guessing game.

Everyone you talk to, whether it be developers, investors, brokers, lenders or regulators, has a vested interest in a different part of the market.

At Octopus Property, we have just completed our annual broker survey, canvassing the opinions of more than 80 of the industry’s top specialist finance intermediaries. The results were conclusive. 73% of those questioned said they thought business volumes would increase over the next 12 months. Just 3% predicted a fall in their lending volumes.

It demonstrates the buoyancy of the property market and the demand from a growing pool of property professionals for certainty, flexibility and speed - the hallmarks of the best specialist lenders.

The survey, now in its second year, asked brokers to rank, on a scale of one to five, which factors were the most important when selecting a funder. Continuing the trend of past surveys, certainty of funding came out on top, followed by flexibility, service and speed. This comes as little surprise, given that the broker’s reputation is on the line if the financing falls through. It also explains why lenders are increasingly looking at new sources of funding, such as banking lines or securitisation.

The digitalisation of the lending sector has been a topic of increased conversation, mirroring what is going on in the wider financial world. And yet, of all the factors offered in the survey, website and online tools were ranked last. In many ways this is not surprising. While technology is important in making processes more efficient and accessible, borrowers increasingly require a bespoke solution to their funding needs, which can only be delivered by a knowledgeable and experienced human.

Over one in five of those surveyed revealed that regulation was the biggest challenge to their business in 2018, primarily stamp duty increases and a reduction in mortgage interest relief for landlords. Last week’s UK Finance figures – revealing that the number of BTL mortgages completed in June dropped by just under a fifth compared with a year earlier, highlights the increasingly tough environment.

Increased regulation is also creating opportunities though, with BTL representing the third biggest opportunity for brokers, behind only development and the growing size of the market.

Some 22% of respondents said that development finance represented the biggest market opportunity, as more borrowers look to the favorable returns available, the low interest rate environment and supportive macro policy encouraging the delivery of more housing and structural trends towards alternative-use classes. 

Despite some suggestions that wider market nervousness and other general economic factors could be cause for concern, our survey reveals positivity among the broker community. This mirrors our own view that the market opportunity has never been better for specialist lenders.

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