Brokers demand greater transparency on bridging costs

Offering clients the lowest headline rate available in the bridging market might not be enough to satisfy the regulator, which is keen to see more transparency, a broker has warned.

Speaking at a Fincorp event Beverley Loggia, director of Oliver Rae, said: “Bridging is becoming more and more available to clients and more and more a necessity given the complication and regulation in our industry at the moment. And it is something the Financial Conduct Authority is looking at – the pricing and structuring of bridging deals – so well worth considering when you’re putting a solution to your client.”

Her comments followed a suggestion from bridging lender Fincorp’s director Matthew Anderson, that keeping bridging clear and simple was becoming even more important in today’s market. He said: “I feel like a broken record sometimes when I talk about headline rates and the fact that they aren’t always the golden egg they might seem. I hear from clients far too regularly that they’ve been hit by heavy fees on the way into a deal or the way out.

“While bridging lenders have become a lot more professional and we are lucky to have a lot of great, honest people in this industry, there are still too many examples of clients who didn’t feel they were made aware of the true cost of a deal before they signed on the dotted line.”

Loggia said: “Fincorp’s offering is different from other providers in the market because there are no fees. It may appear that their rate is slightly more expensive, but I think their offering is a good example of transparent charging. There is no small print, no compounding interest, no interest charged on fees rolled up. It may not suit every scenario, but it demonstrates how easy it is to be up front about what a loan actually costs.” 

In September, FCA mortgage and mutual sector manager Lynda Blackwell revealed the regulator had some concerns about the bridging market. And with second charge mortgages falling under the regulator’s remit earlier this year, Fincorp’s directors Anderson and Nigel Alexander have both been vocal about the need for more transparency in charging.

Anderson said: “We are not suggesting that no fees is the only way to charge – far from it. People need choice and flexibility and sometimes fees are worth paying. The issue isn’t the fee itself, it’s the fact it can be so hard for clients to really get a grip on what a loan is actually costing them. This isn’t about badmouthing the market either – we just think it’s good business to be honest with our customers and make sure they fully understand the contract they’re signing with us.”

Also speaking at the Fincorp event Marcus Rolle, director of One Stop Finance, said: “Headline rates and up front fees are part of a range of things that have to be considered on a bridging deal – it’s part of an overall package. If you’ve got a bridge that you know is a three month deal, a lender that doesn’t have an up front fee that may have a slightly higher margin is going to be a better bet than someone who appears to be cheaper but has a chunky fee to start with. You’ve got to know the deal and you have to get an honest answer from the client on how long they need the money for. There’s a cross over point and you have to do your analysis carefully before you make your recommendation on which offer is the better option.”

He added: “Bridging finance is an important part of any commercial broker’s toolkit. With the clearing banks not necessarily wanting to play ball at the moment on what is seen by some as a riskier end of the market, developers need access to a good bridger.”