The entrance into the bridging market by Octane Finance will hopefully be a welcome shake up for the short-term lending sector.
While criteria has been pushed a little bit around the edges we have not seen a great deal of innovation until now, so Octane’s product-less proposition where they underwrite purely on the basis of risk is really something different.
A market split in two
The rest of the market is really split into two camps. We have lenders like Shawbrook and Precise which offer very low rates but as a result have more detailed underwriting requirements or more cautious criteria. Or we have the lenders such as MT Finance and West One who have more flexible underwriting, so can move quickly but charge higher rates as a result.
Low rate or quick deal
There is a place and a demand for each type of lender, but it is important for a broker to understand why one rate is much lower than another and to know which lender is most likely to provide the solution the client really needs. If you have a client that needs a loan turned around within a week or two for example, it is essential to pick a lender that can deliver that. For another client who does not have such pressing time requirements, but who wants the lowest possible rate then a different lender will be suitable. Of course, a client with more complex requirements such as property issues or credit issues, will need a lender that can also be sympathetic to these needs.
In each scenario, it will be a case of managing the client’s expectations, to help them understand why it is not realistic to expect a bridging loan that is both very cheap and can complete within days. Helping the client to pick a solicitor who is familiar with the conveyancing required for bridging loans, can also be an essential component in delivering within clients’ timescales.
Get some help
There are many bridging lenders in the market which include mainstream known names, lesser known specialists and private funders. This can be a challenge for brokers unfamiliar with bridging, so this is where the use of a packager can be a real assistance to a broker to get the right solution for the client. As many bridging loans are not ‘off the shelf’ in the same way as mainstream mortgages would be, using a packager that can share with you which lenders it trusts to deliver on those clients’ needs, has a considerable value
Bridging loans are used for a wide variety of purposes from an auction purchase, as a chain break, for refurbishment, or even to provide ready cash for a business deal. We are fortunate in the UK to have a wide variety of lenders that will meet each of these needs – but no lender will meet all of them. If you have a client where a bridging loan is the solution but you are not familiar with the bridging market, make sure that you use someone that is.
Liz Syms is the winner of the Press Spokesperson of the Year award at the first ever British Specialist Lending Awards.