The specialist lending market has taken on a far more significant position within the mortgage world over the last few years. So it was encouraging to see the results of the poll among Mortgage Solutions readers, which found that 70% of brokers felt that specialist lending had played a bigger part in the advice process over the last 10 months.
It is understandable that brokers highlighted the keener pricing now on offer from bridging lenders as a factor in that growth. All lenders strive to offer as competitive a product range as possible. But how do you go about getting your pricing right?
Firstly, it’s important to acknowledge that you can’t take a ‘one-size-fits-all’ approach. The properties that lenders are asked to offer bridging loans against can vary significantly. So you need to develop a product range that is genuinely diverse, covering the specific sorts of cases you’re likely to deal with.
It’s something that we tackled earlier this year when we split our bridging loans into three tiers. Tier One is suitable for the more vanilla bridging case, and is available up to a maximum loan-to-value of 75%, which is unusual in the current market. Because these cases tend to be rather more straightforward, it’s easier – and therefore cheaper – for Lendinvest to secure the funding for those loans, and that feeds into the interest rate on those loans.
But for those cases that are a little quirkier, there’s the option of Tier Two, which is slightly more expensive. That covers cases like HMOs, non-standard construction properties and those where the remaining leasehold is between 60 and 80 years.
And finally there’s the third tier of commercial bridging for – you guessed it – commercial cases.
Breaking the product line-up into a more granular offering of course makes life a little easier for brokers and their clients. It’s also a reflection of the importance of building a diverse range of funding sources. At Lendinvest we have devoted a lot of time to putting together a wide variety of funding sources, covering direct funding likes from firms like Macquarie, our two managed funds which we operate under the Lendinvest Capital banner, and our online investment platform for retail investors.
However, it’s not enough to simply offer a low rate. When we polled brokers earlier this year about the factors that influenced which lender they chose to place cases with, it wasn’t the pricing that came out top.
Our survey found that turnaround times and support from business development managers (BDMs) are the most important consideration. In the bridging market, where time is often of the essence, brokers and their clients want to work with lenders that can offer certainty of funding, and then deliver that funding quickly. That has become even more pronounced in the post-Brexit landscape.
Getting your pricing right is of course hugely important. All good intermediaries will strive to get the best deal for their clients.
But as brokers begin to devote ever more time to working with specialist lenders, it will be those firms who offer reliability and a collaborative approach that engender loyalty among intermediaries.