Andy Reid, Director – Intermediary & Network at Oblix Capital considers how the specialist lending industry may start to come out of the current Covid-19 crisis.

Our industry isn’t alone in struggling to function as usual at the moment. Brokers and borrowers are having to cope with lower lending and risk appetites from lenders and where funding is still available, the process has slowed down due to the reduced availability of professional services such as valuers and lawyers.

This is an industry that was thriving before the crisis started, and I’m confident that when normality starts to return, quality lenders such as Oblix Capital will work tirelessly with brokers and borrowers to get the wheels turning again quickly. The need for fast bridging products will increase, meaning that demand for valuers and lawyers is likely to continue to outstrip supply, particularly in the early days. Whilst lenders will have an appetite to ramp up their lending again, the reduced availability of third-party professional services may hinder their ability to do so. As a result, transaction times may suffer, for a while at least, when compared to pre-crisis service levels.

We’re likely see a bottleneck of existing bridging facilities that are nearing their end date (which might already have been extended in the meantime), which will be looking to move onto a development or term loan. If property values fall because of the crisis, initially at least, this may make it more difficult to redeem existing facilities and restructure a new product, which would otherwise enable borrowers to move forward.

From a development perspective we anticipate a rush to quality, meaning that development of residential and student accommodation should be OK, whilst commercial development may slow down, at least initially. Existing development loans that have reached practical completion will be looking to repay, move to a development exit bridge, a term loan or a sale, but changes made to residential and buy-to-let loan criteria during the crisis such as reduced LTVs may need to be reversed before these loans can be placed. Much like bridging, there will a pent-up demand for professional services such as valuers, quantity surveyors and lawyers, and borrowers and lenders alike will be pushing for valuations, re-valuations and site visits to be completed in order to enable monies to be drawn down. Once capacity issues are overcome, the LTV metrics on the projects are likely to be adversely affected which in turn will enable mezzanine and equity providers to invest further.

Whilst we’re all going through a difficult time at the moment, I’ve been delighted (but I must say not surprised) with the positive attitude displayed by all of our friends and colleagues in the industry. We will get through this together, and when we start to come out the other side I’m confident that lenders will work closely with brokers and borrowers to find solutions to the inevitable problems that will arise.