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5 Things to consider when securing development finance in 2024

By Blog, Development Finance

1. Financial Stability

Portraying your net asset position goes a long way and has become more important as the previous 3 years has shown. Liquidity to mitigate any delays, cost overruns or slow exits helps reduce the risk of a project being put on hold. Having the ability to inject a healthy amount of equity into a project also shows a lender your ‘skin in the game’ providing your lender with the reassurance on your financial commitment to a project.

2. Know your exit

To understand and assess your exit strategy for a project is a key step to a successful development, speaking with your local agents, understanding your preference and understanding the local market go hand in hand. Your finance broker will be able to advise on current exit rates for refinancing, ensuring the most cost effective options available to you. Having a ‘Plan B’ reduces the risk of the need to extend your term or having to consider quick get-out options which don’t always provide the best returns. Planning early can be a helpful way to ensure a smoother exit, early marketing with CGI’s or ensuring you’ve researched refinance exits and even obtained preliminary terms.

3. In the eyes of an Underwriter

Whilst ‘the beauty is in the eyes of a beholder’, the underwriting process is a detailed analysis and due diligence of your project. Their knowledge and expertise mitigate risk of your project facing
unnecessary delay or burden. This process looks at all aspects, from survey reports to title deeds, ensuring there is nothing preventing your development being a success such as covenants on a title or cost mismatches in a development appraisal. If something comes up, our underwriters will try to work with you to find a solution.

4. Build Cost Contingencies

A contingency fund should sit between 5%-10%, this is to cover unforeseen costs, risks, events or changes in scope which could affect the overall project. More complex projects should have a larger
contingency, as the likelihood of an unexpected event taking place or increased costs are more prevalent. If you are using a contractor for the works, it’s preferential that you are agreeing on a fixed price or guaranteed maximin price contract, as this will pass on the liability for unexpected costs to your contractor.

5. Know your lender

We’re not talking about what their logo looks like or their fancy branding, a lender can help keep your project on track so it is imperative you know them from the inside out. Flexibility; do they
operate like a bank or are you able to directly access decision makers. Funding; are they lending their own funds or are they funded and if so, by who? Are there more than one funding lines and are they UK or internationally based? Your lender choice really becomes more important when there is a challenge to overcome. You want a lender who will work with you to resolve and get your project over the line.

Magnet Capital funds “LABC Best Small New Housing Development” in East Anglia

By Blog, Development Finance

Magnet Capital’s recent development at Low Street Glemsford, Suffolk, has been awarded the Local Building Control (LABC) Building Excellence Awards for East Anglia. Following this the award has been nominated for the prestigious LABC National Award, the final of which will take place in London in January 2023.

Magnet Capital provided a 12 month facility of £456,000 for a two x three bedroom bungalow scheme built by highly regarded developer David Slater of DJ Slater Limited, a long standing client of Magnet Capital. The project was completed within 12 months, despite it being during covid.

Sam Howard Co Chief Executive, “We are delighted for David who we have known for many years and the award is a testament to the quality of his housing developments. I visited the site personally numerous times during the 12 months of this project, so I knew it was a special development, but it is great he is getting the recognition for his work.

This project was an excellent demonstration of our ability to work closely with the client and provide him with the funds he needed to complete the project as quickly as possible and to the highest quality.

As a genuinely specialist development finance lender, we are laser focused on building long standing relationships with our clients and proving time and again our added value. We wish David every success in the final of LABC National awards”

David Slater Director of DJ Slater, “The Low St. Development saw the demolition of redundant agricultural building, transforming into useful, modern, efficient and environmentally friendly affordable housing in a rural environment within walking distance of a thriving village.

The success of our development project was a testament to the team we were fortunate enough to work alongside. A special thanks to Sam Howard of Magnet Capital, whose longstanding good relationship with myself, expert knowledge, advice, and lending support assured that every step of this development process met us with ease and total professionalism. We highly commend Sam Howard and the team at Magnet Capital and look forward to working with them again in the future”

Magnet Capital target £60m of new development loans in 2022

By Blog, Development Finance, Lending

Specialist development finance lender Magnet Capital have today announced their 2022 target of £60m of small development finance loans. The North London based lender has grown consistently since their launch in 2018, and are now aiming for their biggest year yet. The lender recently announced the incoming of new staff to bolster both operations and sales sides of the business.

Magnet Capital Chief Executive Ashley Ilsen commented, “We’ve carved out a great niche in the specialist lending market, focussing on development finance loans below £2m. We’re still seeing this area as poorly served and still hear some concerning stories about the quality of lending practices in this part of the market. At Magnet Capital we put a tremendous emphasis on transparency and quality of service. This includes the ability to be genuinely flexible throughout the loan which is needed for development projects now more than even. Our ability to consistently deliver has put us in a fantastic position going into 2022”.

Magnet Capital have also recently launched a new website to help speed up the process of handling incoming enquiries.

Also why not check out…

Magnet Capital expands team – theintermediary.co.uk

construction-on-building-by-sunset

Should we be concerned about the Residential Property Market – insights from the coal face of the housing market

By Blog, Development Finance

I recall sitting at my desk in March of last year, with the COVID 19 pandemic’s impact starting to take hold and being told by surveyors and commentators that residential house prices would crash by 20%, possibly more. One mentor of mine, an industry doyen, said this will be like the property crash of 1973 again. As Managing Director of a Development Finance lender, I felt the cold winds of a housing crash, as we decided whether we should change our lending criteria, based on these warnings.

Here we are 18 months later and not a day goes by when I don’t read an article commenting on the surge in house prices. This is corroborated by our experience on the ground, where our borrowers are selling their completed developments in record time, at prices well above the levels we had originally valued the properties at. We are seeing houses selling off-plan or at the very early stages of the build. It is not unusual for there to be multiple offers from buyers, well over the asking price.

Our surveyors report the same is happening in other parts of the country. For example: double digit price rises in Nottingham, properties over £1 million in rural areas seeing 7% rises in the year to March and so on and so forth. Net mortgage borrowing was the highest in March 2021 than in any other month since comparable data began in 1993.

The reasons for this market mania have been well discussed. Low interest rates, a chronic shortage of supply of quality housing and lifestyle changes, where buyers want more space and are prepared to move out of urban areas, have led to increased demand. Then throw in a stamp duty cut, a scheme to support 95 per cent mortgages for first-time buyers and then the human element, whereby the fear of missing out leads to increased prices. It becomes a self-fulfilling prophecy, with the media, estate agents and other parties commenting on the surging house prices and the record highs, which in turn leads to buyers worrying that time is of the essence.

My fears back in March 2020 thankfully have not come true, but I am concerned that the market is now overheated, and we could see a readjustment, next year. We will see the effects of the end of the stamp duty cut, the possible ending of quantitative easing and interest rate increases. My sense is that the euphoria will stop and there will be a pull back. Hopefully, I am wrong, but I always prefer to hope for the best but prepare for the worst.

Sam Howard

moving-boxes

How Will Second Lockdown Affect Mortgages and Movers?

By Blog, Development Finance, Uncategorized

On the 31st October, Prime Minister Boris Johnson announced the new England lockdown, which was implemented on the 5th November. This is the second national lockdown for England this year, and has left many home movers concerned about what the future holds for their relocation plans.

 

Thankfully, official guidance has been published surrounding the property sector, with the Financial Conduct Authority (FCA) proposing an extension on mortgage holidays to last until the 31st January 2021, helping those who are behind on their mortgage repayments or with multiple loans outstanding.

 

The Daily Express report UK Finance’s MD of Personal Finance Eric Leenders comments:

 

“Lenders are providing unprecedented levels of support to help customers through the Covid-19 crisis and stand ready to deliver ongoing assistance to those in need.”

 

“The industry is working closely with the Financial Conduct Authority to ensure customers impacted by the new lockdown measures will be able to access the most appropriate support.”

 

How Does the Second Lockdown Affect Movers?

 

Concerns have been raised for those currently in the process of moving homes, worried that the lockdown would cause delays to their plans. However, it’s been announced that estate and letting agents can continue to work throughout the new lockdown – provided that they follow the appropriate COVID-related regulations.

 

Housing Secretary Robert Jenrick tweeted just before the new lockdown that “Yes – the housing market will remain open throughout this period. Everyone should continue to play their part in reducing the spread of the virus by following the current guidance.”

 

Official guidance from the government regarding the matter of moving home was first published earlier in March this year, and subsequently updated during August. This guidance, it’s reported, still applies throughout this second lockdown England is currently in.

 

This guidance encourages prospective buyers to make the most out of virtual viewings, and to only visit properties on their shortlist of potentials. The guidance also claims that those visiting agent’s offices or viewing properties should wear an appropriate face covering (unless exempt).

 

Those selling their properties have also been encouraged to leave them for viewings, and adhere to government guidance around preparing properties for viewings – including cleaning hard surfaces, door handles and floors, and opening internal doors before prospective buyers visit with agents.

 

Those due to move house over the course of the next month have also been advised to do as much of the packing themselves as is possible, and to speak to removal firms in advance of the moves if they are unable to pack themselves up.

 

More advice on moving home can be found on the government website guidance page here.

construction-on-building-by-sunset

Construction Should Continue Throughout Second Lockdown – PM Announces

By Blog, Development Finance

Prime Minister Boris Johnson has announced that construction sites will be able to remain open over the course of England’s second national lockdown.

 

Addressing the nation on the 31st October, PM Boris Johnson stated that the construction sector could remain operating throughout the new lockdown, with restrictions in place from the 5th of November until the 2nd December. Johnson claimed:

 

“The virus is spreading even faster than the reasonable worst-case scenario of our scientific advisers […] so now is the time to take action because there is no alternative. Workplaces should stay open for where people can’t work from home, for example in the construction and manufacturing sectors.”

 

This clarity on the matter comes as a refreshing change to the sector, after the initial announcement of the March lockdown earlier this year caused confusion with some over whether or not sites should stay open.

 

In addition to the go-ahead from the PM for construction sites to remain open and operating during this lockdown, Johnson also added that the job retention scheme will be extended until December this year. Johnson said:

 

“I’m under no illusions about how difficult this will be for businesses which have already had to endure such hardship this year and I am truly sorry for that. That’s why we are going to extend the furlough system through November […] we will not end it, we will extend furlough until December.”

 

The new restrictions for England’s new lockdown, implemented on the 5th November and remaining in place until the 2nd December, require people to remain in their homes unless for certain purposes, to not mix with households other than your own, and for certain businesses and venues to close.

 

Build UK stated the following on the matter:

 

Construction and manufacturing should stay open across all four nations, which is testament to the industry’s response to the pandemic so far. Sites are advised to review their social distancing measures and remind the workforce of the importance of complying with the Site Operating Procedures ‐ Version 6 whilst on site, as well as the new restrictions off site to protect their family and colleagues.”


Tradespeople can also continue to work in people’s homes as long as both the worker and household members have no symptoms of coronavirus. The Work Safe Safe Work Guide can be used to reassure householders.”

 

“Hotels can remain open to provide accommodation for workers. We are currently reviewing the implications for construction workers and please let us know if you have difficulty finding accommodation for workers working away from home.”

 

Build UK have also created an authorisation letter template. This template is for employers in construction to use should their workers be stopped when traveling to and from work, anywhere across the UK.

house-property

FCA Proposes Extension on Mortgage Holidays as England’s Second National Lockdown Looms

By Blog, Development Finance

With England’s second national coronavirus lockdown coming into effect this Thursday, the FCA have recently proposed an extension to the mortgage holidays deadline. Under such proposals, borrowers will have until the 31st January next year (2021) to apply for the payment holiday.

 

The scheme was set to end last Saturday, however, with the FCA’s new proposal, borrowers could now be provided with a little more leeway in light of the current situation, and the new measures due to be implemented.

 

According to UK Finance, some 2.5 million borrowers have opted for a mortgage payment break since the pandemic first begun.

 

Last week, a Joseph Rowntree Foundation study found 1.6 million households were concerned about their mortgage payments for the next three months. This new extension to the mortgage holiday scheme could be a welcome relief for some, providing support for borrowers who are financially struggling due to the coronavirus pandemic.

 

The FCA’s Proposal

 

On Monday the 2nd of November, the FCA proposed to extend the payment holiday availability, adding to their website a section on “Our proposals to extend support”, stating:

 

“We announced that we would propose more support for people affected by coronavirus. We’ve set out these proposals below. If these are confirmed, we’ll provide details on how to apply for this support.”

 

“Remember, don’t contact your lender about this extended support just yet. But if you’re struggling with your finances, get in touch with your lender to discuss your options.”

 

What Does This Extension Mean for Borrowers? 

 

This extension could come as a great relief for borrowers struggling with mortgage repayments as a result of the coronavirus pandemic. The FCA’s proposals set out earlier this week included the following measures:

 

  • Those who haven’t already taken out a payment holiday will be eligible for a maximum of two payment deferrals over a total period of six months.
  • Those who already have a payment holiday will be able to apply for another deferral of three months.
  • Those who had a payment holiday but have now resumed their mortgage repayments can apply for another deferral of three months.

 

Borrowers who have had two three-month payment holidays already, or alternative support has been agreed with their lender, will not be able to apply for another deferral.

 

The new proposed deadline for requesting a payment holiday is now the 31st January 2021. It has also been reported that deferrals will not be marked on credit files as missed payments.

 

While the government has claimed that using the mortgage payment holidays will not impact upon borrowers’ credit files, some have reported that they found it difficult to get other types of loans after informing lenders that they had deferred their mortgage repayments.

 

Banks currently have until the 5th November (this Thursday) to respond to the FCA’s proposal.

houses-properties-lit-up

Record High House Prices – Property Market Continues to Boom Amidst COVID-19

By Blog, Development Finance

In spite of the coronavirus pandemic and the subsequent economic crisis that has ensued, findings suggest that the property market is continuing to boom.

 

Although the global pandemic has effected many peoples’ lives, leading to job losses and a reduction in low-deposit loans, temporary measures put in place by the government have attempted to support the housing market through this turbulent period.

 

With such temporary measures as the stamp duty cut, introduced earlier on in July this year, buyers have been given a window of opportunity in which to buy a new property and save money on certain costs associated with this process.

 

Figures from a property website have recently revealed that during October, the average price of a home in Britain hit £323,530 – a record high. Compared to a year ago, prices are now £16,818 (5.5%) higher, this being the largest rate of increase in over four years.

 

Rightmove director of property data Tim Bannister was reported to comment the following on the matter: Previous records are tumbling in this extraordinary market, and there are still some legs left in the upwards march of property prices.”

 

Rightmove have announced that their predictions for the annual rate of price growth could peak by December, predicting this to be around 7% higher than it was a year ago.

 

In spite of an effective market closure that occurred between the end of March and the middle of May, Rightmove claim that so far 2% more sales have been agreed in comparison to this time last year. In addition to this, Rightmove have also said that the average time in which to sell a property has also reached a record-breaking high of 50 days – being a whole 12 days faster in comparison to this time last year.

 

Bannister further commented: “Many buyers seem willing to pay record prices for properties that fit their changed post-lockdown needs, though agents are commenting that some owners’ price expectations are now getting too optimistic, and not all properties fit the ‘must have’ template that buyers are now seeking.”

 

“Not only is the time left to sell and legally complete before the 31 March stamp duty deadline being eaten away by the calendar, but more time is also needed because the sheer volume of sales is making it take longer for sales that have been agreed to complete the process.”

ashley-ilsen

Magnet Capital added to Dynamo’s panel

By Blog, Development Finance, Lending

Development Finance lender Magnet Capital have announced that they have been added onto the lender panel for Dynamo.

Their development finance offering will be available to Dynamo’s client-facing mortgage consultants and members of Dynamo for Intermediaries. This follows the lender’s recent announcement that they have added to their operations team to meet growing demand for their products.

Magnet Capital Chief Executive Ashley Ilsen said: “We’re delighted to begin our journey of working with the team at Dynamo which will undoubtedly give our products further market reach. In testing times developers need to work with lenders that can deliver and above all remain consistent in their offering. During the recent Covid-19 lockdown we backed all our schemes and carried on writing new business without reneging on a single deal. We’re here to be a long-term development finance partner.”

Ying Tan, founder and chief executive of Dynamo, added: “We’re excited to be joining forces with Magnet Capital whose personal and customer-oriented approach to lending so closely matches our own company values. I know that our consultants and club members will welcome their tailored development finance options and commitment to helping clients’ businesses grow.”

young-homeowner-moving-in

Government Reveals 95% Mortgages for “Generation Buy” Scheme

By Blog, Development Finance

During last week’s Conservative party conference, Prime Minister Boris Johnson unveiled his proposal for turning “generation rent into generation buy”. Johnson’s proposals involve making long-term, fixed-rate 95% mortgages more accessible for first-time buyers.

 

Johnson said during the conference that his party needed to “fix our broken housing market”, helping younger generations of people who struggle to afford deposits onto the property ladder.

 

Johnson continued: “We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95% of the value of the home – vastly reducing the size of the deposit.”

 

“We believe that this policy could create two million more owner-occupiers – the biggest expansion of home ownership since the 1980s. We will help turn generation rent into generation buy.”

 

Lending in 2020

 

Since the coronavirus outbreak and the global pandemic that has arisen from this, low-deposit loans have all but disappeared, many lenders withdrawing their offerings of 90% – 95% mortgages.

 

PM Johnson claims that out of prospective first-time buyers, two million could afford repayments on a mortgage, however face difficulties getting approved. In light of this, Johnson believes that by making low-deposit loans more accessible to such buyers could create, as previously mentioned, “the biggest expansion of home ownership since the 1980s’”.

 

So far, the government has yet to go into detail as to how plans for “Generation Buy” would work. However, it’s been speculated existing regulations may need changing in order for this to be feasible – including those established after 2008’s financial crash.

 

Such rules restrict the amount of high LTV mortgages lenders are able to offer. When applying for a mortgage, the maximum amount borrowers will typically be able to get is four and a half times their annual income. On top of this, Bank of England regulations further limit the attainability of this maximum amount – only allowing lenders to offer 15% of their loans at this amount or higher.

 

These rules, as well as other measures for affordability that surround lending criteria could, theoretically, be relaxed. However, the chance that mortgage lenders would be on-board for such a change up of regulations, particularly during a time of such economic uncertainty, is unlikely.

 

A possible way around this would be for the loans to be guaranteed by the government, holding responsibility over any and all borrowers that default on their home loan.

 

While many have started to predict the feasibility of Johnson’s plans, only time, and further announcements surrounding this plan, will tell just how the government intends to introduce “Generation Buy” to the UK.