One to One: Tom Simpson, YBS Commercial

This month, Specialist Lending Solutions is sitting down with Tom Simpson (pictured), managing director of YBS Commercial.

He has worked at Yorkshire Building Society for around a decade, initially joining as director of compliance before taking on his current role in 2019.

Prior to that, he was director of financial services risk and regulation at Deloitte for just over four years, and before that, he worked as a senior consultant for banking strategy and transformation at Navigant Consulting for a year and a half.

Simpson also worked at HBOS between 2006 and 2009 in operations, planning and strategy.

How did you get into the mortgage industry?

By chance rather than design. I started my career in financial services in 2005 after graduating from Leeds University. I wanted to stay in Leeds as my girlfriend (now wife) was training to be a nurse in Leeds, so I needed to pay the bills to stick around.

I took a temporary position handling mortgage endowment complaints, and took things from there – working hard and playing the hand I was dealt each step of the way. I’ve been lucky to work with some fantastic people, and am really pleased to have the chance to make an active contribution to such a vibrant and multifaceted sector as commercial lending.

What are enquiry levels like in the commercial mortgage landscape like so far this year? Are there particular areas of growth?

We are seeing more stability this year compared to 2023, although the market remains subdued versus historical levels. This is demonstrated by commercial real estate transactions falling by 46% in Q1 2024 compared to the same period last year.

And we are still seeing trends that have impacted market size – such as commercial landlords buying in cash or deferring purchase activities until funding costs improve. We are also seeing shorter-term financing options being taken, with the intention of sourcing longer-term deals later, in the hope of funding costs improving.

How would you describe the lender and pricing landscape for commercial mortgages at the moment? Do you expect this to change in the near term or long term?

The landscape is competitive, and there are a number of firms in the market with healthy appetites for growth. This creates competition that, ultimately, is good for customers. Near term, I am hoping that we avoid repetition of the kinds of significant economic shocks that have dominated the landscape over recent years, to help create stability in terms of funding costs.

Longer term, I see competition increasing. However, the current proposals around how to implement the Basel 3 capital changes in the UK have the potential to impact financing for small and medium-sized businesses (SMEs) and investment in the property sector.

This could potentially increase the levels of capital that lenders have to hold against different tranches of lending, leading to higher borrowing costs for small businesses and investors, and therefore reducing the availability of funding in the economy further.

The Basel 3 rules remain proposals at this stage, and it would be good to see a proportionate approach taken when the final rules are released, to balance the need for stability with support for businesses, property investors and therefore the wider economy.

What are the biggest challenges for commercial mortgage applicants, and how can they be overcome?

Finding the right lender that can best meet an applicant’s individual needs can be a challenge. Also, being able to provide the information a lender will need to see, in order to lend responsibly, particularly for businesses not experienced in securing finance. The best way to overcome this is to work with a reputable commercial finance broker who can help borrowers navigate these and other complexities.

Do you think awareness of commercial mortgages needs to be improved?

Absolutely. The lack of appetite for lending from the mainstream banks has created a market opportunity by lowering barriers to entry and creating a diverse competitive funding landscape. There are many commercial finance lenders in the market, and their risk appetites are determined by their funding models.

With lenders having differing focuses in terms of segments and risk appetites, it can be hard for investors and SME businesses to know where to turn for their financing needs, and to understand which lender is right for them. The role of the commercial finance broker is so important here, and it’s been great to see the National Association of Commercial Finance Brokers (NACFB) promoting professional standards in the sector, to ensure these clients receive the highest quality support.

What are the priorities of YBS Commercial in the long term and the near term?

Our balance sheet is now approaching the £2bn mark, which is fantastic progress, but in reality we are only just getting started. Long term, we will transform the commercial finance industry by offering something genuinely unique in the market.

We have wonderful people and products – and are prioritising digitising our business to improve our processes, and crucially free up our team to focus on human interactions. We are very clear that digital will not replace the human touch, and we will remain focused on meeting the needs of our brokers, in the way they would like us to do it.

We have significant growth ambitions, and these will involve entering new markets such as the SME sector, which is an under-served market segment. We’re also investing in our processes and systems and expanding our capacity, recruiting the best in the industry to complement our existing teams.

Finally, we’re committed to providing an award-winning commercial mortgage service, offering a strong alternative to the big banks with purposeful propositions that support local businesses and their communities.

YBS Commercial created a London hub earlier this year. How has that been received, and will the firm pursue a ‘hub’ model in other areas?

We’ve seen a fantastic response to this. Having boots on the ground available for commercial finance brokers is so important, especially in a complex industry where no two customers, transactions or assets are the same. Our London team have hit the ground with a bang and are already supporting our brokers with over £100m of deals – which is fantastic progress in a short space of time.

We also operate lending hubs in the Midlands, North and South East, Wales and the South West, as well as having a specialist team for commercial investment and SME lending once we launch our proposition in this area. We are always looking for opportunities to expand further, so watch this space!

YBS Commercial said that it was expecting to double its workforce this year. Where will recruitment be focused?

The areas we will focus on are those that help differentiate us in the market in terms of the service we provide to our broker partners and borrowers. This includes our sales, underwriting and servicing teams. We are committed to recruiting the best in the industry and building a diverse and inclusive operation where our people can thrive.

There is a real buzz throughout the business, with fantastic collaboration across a broad transformational agenda. We’re excited about the journey ahead, and any new starters will be joining a fantastic team of highly motivated people.