As a small, short term bridging lender, loan to value plays a vital role in protecting our business from downturns in the market, which are a constant threat in this pandemic landscape. According to MT Finance, bridging activity rose by 46% from July to September. This number is lower than pre-pandemic levels, but some of the increase in bridging finance over the last three months can be attributed to borrowers who struggle to obtain finance from traditional lenders.

Our credit committee meet on a regular basis to discuss the viability of loans that have been brought to our attention. The decision-making process becomes more arduous when the LTV of a deal creeps over 70%. For our business, 70% is a line in the sand that acts as the protection we need during these uncertain times. When a deals LTV increases to a mere 71%, our credit committee can spend hours discussing the pros and cons, and always returns to the fact that the LTV is too high. But is an LTV, 1% higher than our acceptable range, worth the hours of agony and indecision? Should we turn away from a deal that stacks up because the LTV is only slightly too high?

MT Finance’s research suggests that the average LTV has increased from 48.8% to 51.7% thanks to the influx of mainstream borrowers unable to access finance elsewhere.

Most of the loans we fund are dependent on an exit strategy of sale or refinance with a high street lender. If borrowers’ exit strategies start to fail because of a downturn in the market or, in extreme circumstances, we are forced to repossess, then the LTV of the property must hold up as it is the insurance, we need that we can protect our investors’ capital.

At LendSwift we take a dynamic approach and although as a rule we do not lend on deals with an LTV above 70%, we will do so on occasion, to make the deal work. We believe this is good business practice to protect our business and support our borrowers.