‘We are at a point of oversupply of liquidity in the development finance sector’

'We are at a point of oversupply of liquidity in the development finance sector'



Too much competition in the development market has led to an oversupply of liquidity, a lender has warned.


A recent poll conducted by Development Finance Today found that 75% of respondents believe that development finance products are currently competitive enough.

However, Ashley Ilsen, head of lending and CMO at Regentsmead, suggested that some of this competition was driven by inexperienced lenders who were creating a surplus of funds.

“I would say we are at a point of oversupply of liquidity in the development finance sector,” Ashley stated.

“Competition is, of course, a good thing, however, what is concerning is when we see a case of history repeating itself whereby new lenders are still coming in with perhaps a lack of development finance expertise and end up chasing the marketing either in rates or loan to value.

“Development finance is not a natural extension of bridging, however, we are still seeing errors made by lenders on the ground.”

Nevertheless, James Bloom, managing director of development finance at Masthaven, insisted that developers were actually benefiting from this influx of new entrants.

“There are some excellent specialist lenders and challenger banks starting to disrupt the traditional lending model, which is a good thing for developers.

“It is vital for developers to have access to a wide variety of finance options as different projects require different solutions.

“Competition is always healthy and leads to a better buying opportunity for the consumer, in this case developers.”

John Waddicker, director at Positive Commercial Finance, praised this level of competition, though he admitted that it could potentially carry its own problems.

“Competition is great because it puts more pressure on lenders to scrutinise their own proposition.

“I expect lenders will be inundated with enquiries currently, but perhaps with lower conversion rates given the array of lenders offering a similar product.”

Despite this, Ashley explained that competition could be quantified by factors other than products, such as expertise, sensible lending practices and offering borrowers a variety of solutions.

Scott Marshall, director at Roma Finance, concurred with this explanation, questioning whether rates were the sole means by which lenders could remain competitive.

Instead, Scott believed going the extra mile played a large part in attracting business.

“This increased service level and checking the viability of a case has meant that cases have gone to pay out that may not have with other lenders and in some cases the borrower would have been left high and dry.

“I think that being competitive also includes the quality of underwriting, processes and speed of decisions as well as providing a first-class service throughout the case, from start to finish.”



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