Coronavirus COVID-19 Update!

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Bridging Loans and Covid 19 Lending Changes

Up to date Bridging Finance Changes due to the Coronavirus

KIS Finance remains open 7 days a week.

Our specialist team are all set up working from home, ready to provide the funding that you need.

The Coronavirus has had a negative effect on the bridging loan market, seeing:

  • Maximum LTVs dropping by typically 10%
  • Some lenders suspending new lending and loan plans being withdrawn
  • Some changes in the way that loans are processed – ie. more automated valuations and videocalls with solicitors

Loan costs, including interest rates and facility fees, remain very much the same

  • Loans from £100,000 to £5 Million
  • Terms from 1 to 12 months (Up to 24 months possible)
  • Fast turnaround
  • No broker fees
  • No income proof required
  • Desktop and automated valuations available
  • Joint Legal Representation & Video Calls available

Plans and advice to help with Coronavirus related problems

  • Re-bridging
  • Extensions on existing loan facilities
  • Loans for cashflow or keep your business trading
  • Chain Breaks – been let down by a buyer or a lender
  • Development Exit Refinance

We look at all finance options. For examples buy to lets to repay development finance facilities, making use of plans that offer 2% pa fixed rates.

How has the Corona Virus affected bridging finance?

Some bridging lenders have stopped lending

A number of bridging lenders have stopped providing bridging loans during the current Corona Virus pandemic. Two of the main bridging lenders, Together Money and Precise have stopped lending at present, whilst others have also announced that they are temporarily stopping all new lending or restricting the size and types of loan that they offer.

Some current lending applications have been cancelled

Some lenders have cancelled on-going applications and have even pulled current offers where contracts have not been exchanged.  In some cases lenders are requiring customers to start the application process again from scratch.

Those still lending have reduced loan to values and loan sizes

Those lenders who are still offering bridging finance are being very cautious and have taken actions such as reducing their maximum loan sizes.  Maximum gross loan to values (LTVs) are down from 80% to around 60 to 65%.

Lenders are looking very closely at bridging loan exit strategies

Lenders are scrutinising bridging loan exit routes due to the strong likelihood that we will see a recession after the Covid 19 pandemic is over.  This will mean that properties will take longer to sell, and that refinancing may prove to be more difficult.  In addition a recession is likely to cause a drop in property values as demand will be affected by less money circulating in the economy. Lenders will therefore be looking for a realistic exit plan before offering bridging finance.

Lenders are experiencing funding issues

Lenders are experiencing issues accessing funds during the pandemic for a number of reasons.

  • Loans they were expecting to be repaid are suddenly not, affecting the level of funds they have available for new loans. Bridging loans are typically repaid through the sale of a property, but the housing market has currently dried up making this exit route a problem. In addition people are struggling to find options to refinance their loan. The impact each month is that the substantial funds that would normally come back to lenders are not there to be lent out again.
  • Funding lines usually involve banks, hedge funds and investors, all of whom are currently taking a very cautious approach to new lending.  Most are tightening up criteria or stopping new lending altogether, why they wait to see what the long term impact of the pandemic will be on the economy. In the meantime this means lower loan to values and high risk facilities being refused.

Getting valuations done is proving to be a challenge

Due to the current lock down and social distancing requirements, surveyors aren’t currently able to undertake valuations in person if the property is occupied. If the property is empty it may still be possible to get a valuation done, but many valuers aren’t working at all during this period.  This is obviously causing problems for both residential and buy to let valuations.

Lenders who are still operating are making use of automated valuations systems (AVMs), desktop valuations and drive by valuations, as the basis for their lending decisions.

Surveyors are being extremely cautious

Even where a valuation can be done, surveyors are being very cautious. Whilst they will be producing the usual figures for an open market valuation, 30 day, 90 day and 180 day sale, they may also add a revised figure to allow for the likelihood that prices will fall after the pandemic is over.  Some surveyors have even taken to writing, ‘this valuation cannot be relied upon’, on their reports. This makes the report worthless to many bridging lenders, who aren’t prepared to lend on the basis of this type of valuation.

Social distancing causing problems with witnessing legal documents

There are currently problems with getting legal documents witnessed by a solicitor as most are now working from home and not seeing clients face to face. 

Staffing shortages are affecting lenders too

Lenders have also been impacted by the requirement for staff to work from home wherever possible and have had to set up systems to allow staff to work remotely. 

Staffing numbers have been hit by those needing to self-isolate, which has affected lenders’ abilities to deal with new cases.

Some lenders are only focusing on existing clients

Some lenders are focusing on existing clients and dealing with their problems such as difficulties with clearing their loans on schedule.  Where bridging lenders also offer other facilities, such as long term loans, residential and commercial mortgages, they are likely to be busy dealing with requests for payment holidays from customers in financial difficulties.

How KIS Finance can help

  • Working with lenders who are still accepting new bridging applications
  • Going the extra mile and utilising technology, including email, video links and conference calls to get things done
  • Working with solicitors who are able to get deals completed