Jaxon Stevens, Sales Director at short-term property finance specialist lender, Tuscan Capital spoke exclusively to IFA Magazine about the UK Property Market and short-term, specialist finance.
Jaxon has worked in the property finance sector, across different roles, for the past 25 years – high-street banks, specialist providers, and as an adviser. He manages and runs the sales function at Tuscan Capital – a well-established lender that has been active for the last six years in the short-term lending space. Tuscan provides bridging finance for residential and commercial assets across the whole of the UK.
In your view, what does 2024 have in store for the UK property market? Where do you see the key challenges?
I think it’s safe to say, it’s been a positive start to the year. In terms of mortgage products, mortgage rates and lending appetite, there appears to be a lot of confidence being fed back into the market after what was quite a ‘rocky’ 12-18 months.
It feels like a slow and steady return to ‘normality’ – the volume of mortgage products has improved dramatically in recent weeks, with Bank Base Rate (BBR) having stabilised, swap rates coming down, as a result of inflation falling and the reaction to this.
I see 2024 as a road to recovery for the lending market – perhaps not the fastest, but a slow and steady track back to ‘normality’.
In terms of house prices, I see that stabilising. Last year there was a reduction but it wasn’t at the levels initially expected.
I expect to see some changes in borrower habits – both residential and investment/portfolio, with the latter diversifying portfolios in order to ensure the best returns within the asset classes people have.
Within that, I think there’s a lot advisers can do in terms of reviewing what assets are held, and people’s personal situations and whether they are holding the right assets for them. There’s potential for asset types in terms of refurbishment and conversion, and I expect to see the Green agenda playing a significant role here, even if the current Government has rowed back slightly on the requirements for energy-efficiency.
There’s still a growing need for more energy-efficient properties to keep bills down particularly from tenants, and lenders are encouraging borrowers with better-priced products in order to improve the EPC levels of properties to C and above.
How might specialist finance needs such as bridging, etc, be utilised in such a market by advisers? Where might the opportunities lie for them?
Specialist finance often comes into its own during uncertain times or when the asset isn’t considered to be mortgage-able in its current state, and where the high-street, more mainstream lenders are unlikely to consider the risk of the loan worth taking.
Owners are often looking for initial, short-term investment at this first stage in order to make these properties habitable, after which they can then secure a mortgage. Specialist finance solutions are really designed to fund these ‘stop gap’ requirements and needs and to help borrowers move along this path with the asset to move it into a healthier place.
There are therefore opportunities for mortgage and financial advisers to support their client banks in this area – not just in the property investment space but also in residential to improve these properties.
How much more expensive is short-term finance than a traditional mortgage option?
Short-term finance is certainly more expensive, as it is generally calculated on a monthly basis as many of the facilities that are written, completed and redeemed happen within a six/eight/12-month period.
Typically, a good ‘rule of thumb’ is that it’s about 1% per month, which is competitive and can be the right approach particularly when you are improving the asset and often increasing its value. I think it’s a relative cost to the solution it provides, and sometimes the cost of not doing it is far more than the cost of using a short-term finance solution.
Could you highlight an example or two (i.e. case studies) of how Tuscan has helped advisers to support clients’ needs?
First and foremost, we’re trying to raise awareness of the products and solutions that are available, and these are growing in number, so it’s important that people do seek out the services of a professional adviser in order to help them work through, what is, a huge number of options available to them.
In terms of what we deal with on a regular basis, we offer: auction finance, quick acquisition – particularly of uninhabitable properties, refinancing existing short-term debts specifically those that may have run close to expiry, exiting a development, refurbishment and conversion, and more niche areas such as extending the lease, splitting titles, planning, chain breaks, downsizing, etc.
A couple of recent examples of cases which completed include a refinancing of an existing short-term facility in Essex, where the client’s buy-to-let mortgage was delayed, after they’d originally purchased the property to convert into two flats. They were due to be charged approximately £15k in extension fees on their short-term funding, however with Tuscan being able to complete the transaction very quickly, we were able to exchange that short-term debt and buy the client a bit more time to get their BTL funding in place.
We also had a client down in the South West who had knocked down an existing hotel and built 15 holiday-let flats and needed time to get the commercial term mortgage in place, but also prove the income stream from those flats. Tuscan was able to provide finance so they could pay off the development lender, provide the time for the client to run that business, secure some income and essentially prove it worthy of a long-term commercial exit.
There is a lot of help available to advisers, especially if these might be areas which you’re a little bit more uncomfortable with discussing with clients, and we at Tuscan Capital are here to help as much as we can, to outline the potential solutions, to explain how the process works, the costs involved, and to ultimately get the right product option for both the adviser and the client.
