I will leave it to others to sum up the best and worst of 2014, suffice to say that for all the concerns that swirl around the full adoption of the latest regulatory rules across the lending industry and its effect on growing business volumes, I remain convinced that 2015 will be a year of further gains and that brokers will be the main beneficiaries. Potential customers recognise both the shortcomings of waiting for weeks for mortgage appointments from high street lenders and also the very real need for the right kind of advice for anything beyond the plain vanilla mortgage.
The whole sector of specialist lending, including bridging, is an area which brokers need to recognise as not only an income earner but as a real opportunity to help clients and add value. One of the things which has struck me this year particularly is the level of uncertainty that still exists as to whether the bridging and short term lending market is an area for brokers to adopt. Much of this worry comes from an understandable concern that has been fostered by the status of bridging in a predominantly regulated environment. The fact that we have both regulated and non regulated sides to the business does little to foster deeper understanding and I am convinced that there are brokers who shy away because of the fear of getting it wrong. Also, and this is an understated truism, while many bridging lenders are still trying to work out how to get more business, the main issue still remains in the sense that bridging is a peripheral activity that is unlikely to become a significant part of most brokers’ business.
That said, the bridging product has become such a versatile provider of immediate funding that advisers I talk to are sometimes in need of a refresher on where the main uses are and the do’s and don’ts of advising clients. One of my main roles at Complete is to provide alternative solutions for introducers, from which they can make an informed recommendation for their clients. Many newbies are very happy to go through a short refresher on the phone and I thought it would be an idea to look at some of the main points. So for those of you who are already experts, you can turn over the page!
To simplify the process what I suggest brokers do is to look at whether the client is in need of regulated advice or as landlord/developer, he or she only needs an unregulated product. The majority of enquiries still sit within the unregulated products but I have seen an increase with residential loans.
The first question I would need to consider is whether the short term lending option like bridging is the best for the client. This decision can be made easier if the broker has full information and understands their need for bridging. Obviously there has to be some good reasons why a normal mortgage or loan cannot provide what is required. Bridging does what it says on the tin, it is designed to be a fast, short term facility leading to longer term finance or outright sale of the secured property. This leads on to being able to judge whether bridging is going to work. Has the borrower got a proper plan for the repayment of the bridging loan? We call it an exit strategy and it is one of the key points which lenders will look for when agreeing to lend which will be based on the viability of that exit story. While the cost of bridging has come down, going into a bridging deal without a properly thought through exit plan can saddle the client with an expensive loan and lenders do not want these loans turning into longer term commitments.
As for the versatility I mentioned, from its use as immediate funding for auction property purchases, bridging the gap between outright sale or longer term financing, bridging has become a facility which provides funding for short term business borrowing, light and heavy refurbishment, development finance and also enabling the purchase of property below market value. in the end it is the speed that matters and if advisers have clients wanting swift funding for a predetermined short period, this is the right place to be.