Non-bank lender experiences spike in applications from developers

by Duffie Osental10 Jul 2020

Non-bank lender Alpha First Mortgage Investments has noted an increase in new loan applications from property developers.

Scott Massey, director at Alpha First, said that his company is “receiving plenty of new loan applications, with property developers in particular looking to borrow for new projects and acquisitions as they are turned down by banks.”

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“Many developers are struggling with the current tight credit market, as banks are very hesitant to lend for construction or residential property development projects,” said Massey. “Compounding the issue is the fact that there are not as many non-bank lending institutions with available funds now as there was pre-lockdown.

Massey said that the tight credit market also means that interest rates for commercial loans are “unlikely to drop anytime soon. It is a demand versus supply situation.”

While Massey said that Alpha First has funds available through its funding facilities, the company is still being “cautious and conservative” when assessing potential projects.

“We’re particularly focussed on lending to new residential developments, as I believe the residential market, particularly in the main centres, will continue to experience high demand for housing with investors and first home buyers very active in the market,” said Massey. “We are considering all enquiries from potential borrowers to see if they fit our broad criteria, but we are looking for LVRs under 60%, a clear and achievable exit strategy and certainty around the servicing of interest payments.

“We are approving loans for no less than twelve months, which should ensure that the market is well into an upside phase when our borrowers’ loans mature,” Massey added.

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