News & Views

What bridging brokers want: certainty

Low rates and low fees are only part of the mix for brokers looking for a bridging loan for clients. According to brokers themselves, the really important things are certainty, speed and transparency. Bridging lender Fincorp invited 25 commercial and bridging brokers to a day at Lord’s cricket ground just down the road from the lender’s home turf in London’s St John’s Wood in late September.

Speaking at the event Philip Douglas, managing director of P Douglas Finance, said: “When considering which bridging lender to use, we’re looking for certainty that they complete the transaction, speed of response, and certainty that it’s the best deal we can get in the time frame that we have.”

His views were echoed by Curtis Goring, managing director of The Aftersales Network, who also attended the event. He said: “I’m looking for consistency, transparency, being able to deliver on the promises they make to me and to my client.”

The event, hosted by Fincorp directors on 17 September, was an opportunity to get feedback from brokers on the bridging market, client needs and to establish what intermediaries value from the lenders they deal with. Matthew Anderson, director at Fincorp, said: “We are always making that point that being clear and simple about the way we do deals is important.

“It was interesting to hear from intermediaries that they value that too, because we don’t just understand clarity and simplicity to mean uncomplicated about the finance structuring of a deal. It’s also about being honest with brokers when deals are or are not going to get done. We know how important it is that they maintain credibility with their clients – being able to offer clients that certainty is the lifeblood of their businesses.”

Roshan Doostdar, director of Vision Finance, said: “We work with many bridging lenders and they’re all good for different reasons. But there are so many reasons a deal can fall over; you literally can’t make them up. One example really springs to mind: we were working with one of the leading lenders in the market who are honest about the fact they are looking for the near prime customer. Everything was going seemingly well until the lender realised there was a £5,000 restriction registered with the Land Registry on a £600,000 property, and they wouldn’t do the deal. Fincorp agreed to do the deal based on the fact it was only a £5,000 restriction, at a 50% loan to value - they had loads of head room.” 

Anderson added: “No two lenders will have exactly the same appetite for a deal – we are all trying to build loan books that suit our investors’ risk appetites, and these vary. The thing that we all have in common though is that we deal with brokers, and nothing is more debilitating for a broker than having a deal fall through at the last minute. That’s why we have our directors look at each deal when it comes in and make a decision – giving advisers that confidence they aren’t going to let their clients down is as important to us as it is to them.”

Brokers attending the Lord’s event with Fincorp were treated to a tour of the grounds including the Pavilion Long Room, players’ dressing rooms and the museum before being asked to share their views on the market.

London’s property market is slowing down

By Nigel Alexander, director, Fincorp

House prices, house prices, house prices. Seemingly still everyone’s favourite topic on dinner party conversation.

The Bank of England, the Labour party and the Liberal Democrats have all been heard over the past six months worrying that London has a house price bubble and that the value of property is becoming increasingly disconnected from the reality of people’s wages.

Undoubtedly property values in the UK’s capital have seen dramatic inflation over the past few years but I think we are definitely seeing a levelling off in the second half of this year.

Indeed the latest data from Hometrack revealed that house prices stagnated in September for the first time since January 2013, after rising 0.1% in each of the previous two months. Richard Donnell, Hometrack's director of research, was quoted as saying: "While this slowdown can be attributed partly to seasonal factors – including a slight hangover from a slow August – it's clear that agents are wary about the direction of the market as a result of weaker demand and lower sales volumes.”

His view is that speculation about an interest rate rise by the Bank of England, warnings about a house price bubble and September’s Scottish independence referendum might have fuelled uncertainty in the market.

I have to say I agree. But I think there is an added factor that is affecting the top end of London’s market. Much of the growth in house prices has been a direct result of large volumes of foreign cash flowing into prime property in London.

In a world economy that has suffered years of low yielding investment opportunities as governments pumped money into their economies through quantitative easing and kept interest rates at historic lows, smart investors quite rightly saw London property as a pretty good bet.

But my sense is that this year has seen that investment drop off a bit. The Scottish referendum, even with its no vote, has forced our government to reassess the future shape of British politics. Devo Max, in whatever format it goes through, will mark a watershed moment for this country – and no one quite knows what that will mean longer term.

Labour is worried. The Tories are worried. And as UKIP enjoyed widespread success in the European elections earlier this year, David Cameron promised an in-out referendum on Britain’s future in the EU if he’s still in power in 2017.

This all adds up to uncertainty – not something investors like too much of.

I don’t think this means that the London property market is heading for a fall, but it has meant there is a bit less money washing around looking for a home in prime residential property – something I suspect is likely to continue until we have more clarity on our position on Europe after next year’s general election.

A more professional state of affairs

By Matthew Anderson, director of Fincorp

Clear. Fair. Not misleading.

Three words thrown down to the consumer credit market by the Financial Conduct Authority in April this year.

We knew they were coming years before they arrived. Lenders across the bridging market have based their entire marketing strategies on being the best and most regulated that they can be.

And yet, I read with dismay a story in one of our industry’s trade papers that the FCA is still worried about how consumer credit firms are promoting themselves. A lot of the problems they refer to are for lenders that have nothing to do with bridging admittedly – debt management firms and logbook lenders appeared to be among the worst offenders – but there was one concern that caught my eye particularly.

The regulator highlighted “promotions that guaranteed firms would provide credit regardless of customers’ circumstances” as being unclear, misleading and definitely not fair. Although I would hope that none of the professionals who operate in the bridging market would advertise their services to customers using such fantasy to entice deal flow, I continue to worry there is an undercurrent that touches our sector and which hasn’t yet fully let go of that past attitude so rife in the pre-Credit Crunch era.

There are really quite visible advisers out there who encourage customers to use second charge loans as a means to consolidate debt. Of itself, this is not bad advice and in fact, it might actually be the right thing for the customer to do. The problem is when it’s not the right thing for the customer.

As the type of advertising that’s caught the attention of the FCA shows, clearly there are enough people without scruples who are prepared to take advantage of the vulnerable.

Now, why is this relevant to bridging I hear you ask? Well, directly it’s not.

There are enough big and professional lenders, now populated with professional people who have come from banking, retail mortgage lending, private equity and even hedge fund backgrounds that I think we can consider ourselves a professional marketplace. It is good to see so many bridging lenders sticking up for the right way to treat customers. It has become a battleground on which lenders compete for business – and that has to be good for clients.

As one who has worked in bridging for many years, and since long before it became the gold rush it is now considered, it is also extremely satisfying to see so many professionals making a success of bridging and trade bodies such as the Association of Short Term Lenders and Association of Bridging Professionals working tirelessly to maintain standards at a high level.

It might have taken some time, but I really believe that as an industry we are so much further down the professional path than we were even just three years ago. We should take a moment and perhaps give ourselves a tentative and collective pat on the backs. But – of course there’s a but – the fact is that there remains an undercurrent beneath all of the good work that so many of us in this industry are committed to.

There are still questionable practices around remuneration of brokers which aren’t always made transparent to borrowers. There are still shady fees being applied to deals that continue to catch borrowers unaware. There are still those deals being touted round the bridging market that no lender in their right mind will touch, but which nevertheless we see and throw out.

We have come a long way. But as this latest announcement from the regulator reminds us, there’s no room for complacency.