In the last month alone the sector has seen the launch of two lenders – Octane Capital, set up by Jonathan Samuels and headed up by former fellow Dragonfly alumni Mark Posniak – and Elysium, headed by a team which includes Cheval founder David Gammond.
However, bridging brokers have questioned whether there is space for more lenders – unless those lenders are willing to bring to market a unique proposition.
“what is there to arouse interest to switch from existing bridgers offering a very similar package? Not a lot really, would be my view.”
“It seems, almost on a weekly basis, a new bridger enters the market,” said Kevin Wright, director of Positive Property Finance. “The question for a bridging broker is, what are they offering that is any different to what is already on offer? If there is little else, similar rates, similar loan-to-values, similar lending criteria, what is there to arouse interest to switch from existing bridgers offering a very similar package? Not a lot really, would be my view.”
Adele Turton, managing director of Manchester-based Plan A Mortgage Brokers, said she is regularly approached by lenders looking to be appointed to Plan A’s panel from peer-to-peer lenders to “shiny new bridging lenders who want to lend at very low headline rates”.
“There’s only so low they can go before it is no longer profit making. Rate wars never end well”
“The market is quite crowded, what we need is innovation into criteria from new lenders, this is what shakes up the market, not ever decreasing headline rates,” she says. “There’s only so low they can go before it is no longer profit making. Rate wars never end well, and in any event most of all the overall terms wont ever be as competitive, but established successful bridging lenders provide the better overall service. Most of all, they have the experience to evaluate a case properly, whilst the client may be able to secure a lower monthly rate from a new competitor, they gain far more from working with a lender with a wealth of experience which in turn protects the client in the long run.”
Steve Walker, managing director of master broker Promise Specialist Lending, said his firm was currently going through a process of meeting with lenders and then deciding which should be added to or removed from the panel.
“Lenders need to differentiate themselves but far too many claim their USP is speed of decision and funding – that’s important but everyone makes the same claim,” he said. “They need to specifically point to how their service differs which makes them faster and easier. In the regulated sector – both first and second charge – there is room for more lenders and opportunity for them to offer something different.”
It’s a view shared by Michael Perry, bridging finance broker at Enness Bridging Finance. He said where there used to be 20 lenders, there is now over 200.
“There is always space for new entrants to the market, however, they would have to have a different proposition other than simply lowering the rates. For example, FinTech companies could play a valuable role, allowing clients to upload documentation via an app, as well as track their case’s progress – this would only make the process more efficient.”