978 finance is a commercial finance brokerage and is part of a wider group – 978 group. The group itself provides a 360-degree service to property investors, from finding opportunities for investment, managing projects, managing tenants and even developing properties and building houses. It made sense for the finance arm to become a part of the group.
We focus on working solely with property investors and developers in the finance business. We work nationwide and we welcome applications from overseas clients as well.
Although we only arrange finance on UK properties.
Where are you based and where do you operate geographically?
We are based in Lancashire in the northwest of England, but our finance business operates nationally in England, Scotland and Wales. We have even done a couple of deals in Northern Ireland.
We work with investors based in the UK and overseas, so we have a broad geographical reach.
What are the main issues impacting your local market?
The fundamental issues impacting our local market are the after-effects of Covid-19.
It has slowed the pace of business and created huge backlogs within the professional services surrounding our industry, such as surveyors and solicitors.
That has caused numerous delays and occasionally it causes deals to ‘fall out of bed’, or to not complete due to timescales pushing beyond what is reasonable.
We are also in a high inflationary environment. The current economic instability has made all our clients hesitant and mindful of what may happen over the next couple of years.
Locally we have a large infrastructure project, Eden north, coming to Morecambe, in Lancashire, in the next two or three years.
That is causing lots of investment to flood into the area, pushing house prices up further and compressing yield.
However, over the long-term, it will be a large employer and it will bring around £2bn into the local economy.
In fact, property prices that are still well below the national average are starting to find their feet and getting more towards what they should, realistically, be valued at.
What challenges are you facing as a broker?
As a broker, it has been a race to the bottom on rates for the last 10 years and with the current hike in interest rates, they are bounding back up, so we are seeing it is becoming more difficult to secure rates that would have been considered competitive a year or even 18 months ago.
That is putting some of our borrowers off and is causing some to try and scour the market themselves but, they are coming up with similar hurdles.
We are seeing lenders managing risks in diverse ways, and so they are obviously mindful of what could happen over the next couple of years.
Some lenders are looking at lending on vacant possession value rather than open market value or reducing LTVs, as opposed to just having the higher rates as well.
Therefore, lenders are looking at other ways to manage their risks, which makes some deals that were viable six, 12 or 18 months ago simply unviable now from a borrower’s perspective.
What are the main opportunities for brokers in your area and nationally?
The main opportunities for brokers in my area and nationally are looking at smaller developers.
People who are building five to 20 houses are an underserved sector of the market.
We have seen a few lenders creating products to serve that niche over the last 24 months.
We are also seeing a lot of developers going to commercial to residential conversions.
That could well be a thriving marketplace as employers start to realise that they do not need such large offices and large overheads with the shift to working from home post-Covid.
We are also seeing lots of developers looking for those vacant office blocks that they can acquire cheaper than development land to turn them into residential, so I think that’s a great marketplace to be in.
Locally, we are also seeing lots of people entering the short-term let market and there is still a lack of products for that marketplace.
We are certainly working with a few buy-to-let lenders that are opening up the doors to short-term let offerings as well, and I think that’s a growing market in the northwest, in Morecambe bay with the Eden project but also nationally as well.
What could lenders do to help further your business?
What lenders can do to help further our business is improve efficiency. I think a lot of efficiency has been lost during Covid.
Although some have adapted and brought technology in to assist, I think the transition from office-based to working from home is still hindering quite a few lenders and making the process a little slower than it needs to be.
If they could standardise their requirements in terms of information that they are going to ask for and get that to us early in the process so we can work on that quickly and efficiently, that would be better.
We do keep seeing a lot of back and forth as lenders decide they want to see extra bits of information, so if they could standardise that and utilise technology better that would help to increase the pace of completions and allow us to do more business.
Lenders could also look at some niche products in the short-term let sector and broaden the scope on commercial and semi-commercial products as well, which still seem a little underserved in the marketplace
What sets you apart from the competition?
We have decades of experience in the property sector. We came into finance about four years ago having built on our own property experience; we are developers, and we are property investors.
This means that we have been through all the hurdles that our clients are jumping through. That gives us good knowledge from a client perspective as to what is really important and what you need from your broker.
Many people have come to the industry the other way around, from banking to a brokerage or alternative finance.
I think that can leave some brokers with more of a banking mindset which can result in them being limited in terms of creativity and not understanding what is truly important for their clients, the borrowers.