‘Noticeable uplift’ in second charge bridging with growth expected to continue, says Together’s Ward

  • 18/06/2024
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‘Noticeable uplift’ in second charge bridging with growth expected to continue, says Together’s Ward
Second charge bridging has seen a “noticeable uplift” in recent months, with that growth trajectory expected to continue, Together’s Maeve Ward (pictured) has said.

Speaking to Specialist Lending Solutions, Ward, who recently joined Together as an intermediary product manager, said: “I think there’s a couple of reasons for that [growth in second charge bridging]. I think, as the mainstream market gets tighter from a criteria perspective, the specialist market always tends to do quite well.

“I also think specialist packagers are really working incredibly hard in terms of creating that education and awareness of alternative lending solutions.”

She noted that this involved educating around options available, like residential first and second charge, residential bridging on a first or second charge basis, commercial loans and unregulated bridging.

“The point that I’m making there is that when you look at a deal, you can actually say, well, when one door closes, is there another door open?”

Ward noted that the growth in second charges could also be attributed to people being aware that they can release equity from their main residential property as a homeowner business or from an investment property to “achieve the same outcome whilst protecting the mortgage”.

“That will either be because they don’t want to incur a costly early repayment charge [ERC] or because they don’t want to lose a preferential rate. So again, it’s about working together to say, what is it the customer wants to achieve? Let’s look at all of the potential solutions to help them achieve that goal,” she said.

Ward said that as “more and more people start to offer it as part of their product offering and [talk] to consumers about it, I do think that that will grow”.

“It’s all about that lending solution and providing that good customer outcome, and the more brokers that switch on beyond what their core is, the more the message will get out there.

“I absolutely do think that that will continue to grow. I don’t think that’s going to be a flash in the pan at all.”

Ward said that it was likely to see more lenders come into the specialist lending side, adding that it was usually a bit easier to enter the unregulated bridging space as there aren’t as many barriers to entry.

She said: “When you look at bridging per se, what do people want? They want certainty and speed, and that can only be born from actually really knowing the lender that you’re dealing with.

“So, I think we’ll see more lenders coming to that bridging space, maybe lending their own private money as an example, but I don’t think there’ll be a mass influx of them.”

Ward noted that there were more entrants in the second charge space, with Interbridge a notable example, and another lender due to enter the space later this year, but she would be “very surprised” if there were any further entrants into the space.


Signature and API work on the cards for Together

When asked about technology, Ward said that it had automated valuations on both regulated and unregulated ranges.

“If you look at the regulated market, probably the biggest thing at the moment under Consumer Duty is the challenge around fees, and so the more that you can invest in technology to lower that operating cost, then that’s only a good thing because it’s reflected in obviously what the customer is charged in terms of a broker fee, as an example.”

She added that it had Equifax searches, in-house legals and dual representation to help speed up transaction times.

Ward said that the firm was currently looking at e-signatures, adding that was “certainly [in] our direction of travel”.

“We are looking beyond that, in terms of how is technology moving through the likes of APIs, so how do we connect to broker portals, because a lot of brokers themselves are investing heavily in technology?

“They’re either designing their own CRM system, or they are buying off the shelf and bespoking it. What they want is to key in the information once and they want to push that into an endless platform, so we’re actually exploring that more widely to see how that would work within our business,” she explained.

Ward continued: “I think the hardest thing comes with being able to deliver that [API integration] en masse, because everyone wants to be at the front of the queue, and you can only do maybe one or two at any moment in time before you move on to the next one.

“There will always be a period of wait[ing], but I think the biggest thing is knowing that lenders are already on that journey, because that then reduces the wait time and the amount of re-keying that somebody has to do.”


Brokers face ‘land grab’ if they don’t upskill in or have specialist lending referrals

Ward said that it was “absolutely” getting more approaches from brokers who were exploring and growing their specialist lending offering.

She said that for traditional mortgage advisers with large client banks, the growth of product transfers and longer mortgage terms, due to the pandemic and cost-of-living crisis and its impact on affordability making remortgaging more challenging, exploring other avenues for capital raising was crucial.

“What you’re seeing is that those customers [who have opted for a product transfer] probably have tied into a longer-term fixed again, because of market conditions. That doesn’t mean that they’re not going to have a capital-raising need in the not-too-distant future.

“Now, if people are closed off to considering anything outside of their mainstream lending, then financially they will be worse off because their income streams start to slow down,” Ward explained.

She added that if brokers couldn’t offer those alternative lending solutions, then there would be brokers who could, and with Google it meant that customers could explore other options and find other advisers who can offer them the help they want.

“Then you’ve got the land grab. You’ve got all these other people that have already diversified their product portfolios to say: I can help you,” Ward explained.

This means that the original broker misses out on the income from the original transaction, and the new broker can upsell on other things, like insurances.

“The point I’m making is it will become a costly mistake to not broaden what you have within your toolkit. It’s not about them necessarily having to own everything because the specialist market is really hard to navigate, but it’s easy to recognise an opportunity.

“It’s okay to recognise the opportunity and help your customer but refer that on to the specialist, who can navigate that world very quickly for you and get that customer’s outcome very quickly for you,” she added.

Ward said that she was seeing more referrals through specialist packagers, but there were also more brokers that are “entering that and want to own that themselves as well”.

“There will be some occasions where that relationship [between the broker and the packager] might have been in situ for 12 months and actually that person wants to pull away and come direct.

“That’s okay, because the package was training them so well and had the benefit for 12 months and is okay with them coming in directly to us and other specialist lenders,” she noted.


Struggling customers could fuel growth in second charges

Ward said regarding distribution, it was “always looking to look after and nurture our existing partners”.

“We wouldn’t be anything without them. It is very much an intermediary-driven business in the main, but equally we are open to having conversations with new brokers,” she said.

Ward said that the value brokers bring in terms of helping customers that feel they don’t have other options was “immense”.

“I think [on] the regulated side, with the cost-of-living crisis and obviously the pandemic, I think we’re only just starting to see the tip of customers that are really starting to struggle. I don’t think we’ve seen that full impact.

“I think there’s been a lot of consumers doing really well to manage their finances, but getting to a point now where that’s becoming incredibly hard and then once they tip over that edge, even the odd missed payment can be catastrophic for their credit score, and when you look at the mainstream, everything’s driven by credit score.

“There is no conversation to be had, your credit score is pretty much the first driver that they look at,” Ward said.

She said that these customers tended to be “victim[s] of circumstance”, and this would drive up the use of regulated second charges and specialist first charge mortgages.

Ward noted that she wanted brokers to know that if they wanted to learn more about the specialist market, then “our doors are open”.

“We have a team of people that are out on the road that would be only too happy to have a conversation, whether they decide to transact directly or not. We can have that conversation and make sure you’re in the right hands.

“For me, the market will only ever grow if you invest the time in that market, so I think Together does that well, but we will actually encourage anybody to speak to us.”

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