I’ve noticed a tendency in some quarters to promote the belief that all types of specialist lending are basically the same, in that if you can operate in one area you’ll find it easy to seamlessly move into another.
I can understand why it suits some people to give this impression; after all, it should be good for business. Had a dabble in second charges? Then why not try bridging. Or give development finance a go if you’ve placed some semi-commercial cases.
Now, I’m not here to imply that different areas of specialist lending are so complex that brokers shouldn’t attempt to place a case unless they’ve been under the tutelage of a wise old market elder who has been operating in second charges or bridging for 25 years.
It’s just that brokers should consider carefully who they partner with to get the best outcome for their clients, as there are different markets within specialist lending and they need different approaches from master broker and packager partners.
Take the concept of ‘whole of market’. This is a widely-used marketing term by master brokers and packagers and for good reason.
Brokers want to have the greatest pool of providers and products to choose from in order to have the best chance of securing a competitively priced deal for their client and so it stands to reason that this is most likely to be the case when using a ‘whole of market’ master broker, right?
To which I would answer: perhaps. In the first charge residential mortgage sector, there are so many lenders out there, leading to a very competitively priced market.
Your client will have heard of many of the lenders in the market and may well have read about their products and pricing in best buy tables in newspapers or online.
Therefore, if you can’t access that product you’re not going to look good in your (soon to be ex) client’s eyes; you need to have access to as many lenders as possible.
On the flip side, I would argue that offering ‘whole of market’ in bridging finance does not benefit the client and certainly isn’t useful to the master broker or packager.
If you’ve only got lenders on your panel to make up the numbers then this could prove to be counter-productive.
Service can vary dramatically between lenders and when pricing is often pretty similar, service can be the key differentiator; that said, what do you do if your client really wants the product that is five basis points cheaper per month, but you know that the lender in question is really struggling to complete cases because they’re swamped with business? (Answer: don’t have them on your panel in the first place.)
Equally important in the bridging market is certainty and strength of funding. We saw certain lenders in 2022 struggle, letting borrowers down at the last minute as they were hit by the withdrawal of their funding lines.
Communication is also vital. There’s nothing worse for a master broker than dealing with a lender who goes quiet at inopportune times; it consequently leaves the broker and their client in the dark too, which doesn’t reflect well on anyone in the chain.
This is why Specialist Finance Centre (SFC) doesn’t have a whole-of-market approach to bridging.
We select the lenders on our panel very carefully; they have to be well funded and have strong processes in place to be considered.
We’re not looking for a dozen lenders who all concentrate on London and the South East, have very similar criteria and offer a rate of 0.69% per month. Instead, we work with a hand-picked panel of lenders who can be relied upon to deliver when required and in a timely fashion.
We’re not focussed on the capital and the South East – being based in Cardiff and also having a Scottish business in the group – and so we have lenders on our panel who are experts in the regions and other nations within the UK.
I expect bridging to be resilient in 2023; there’s a good chance that investors will use bridging to quickly snap up properties put on the market by those who are feeling the squeeze.
The 2025 EPC deadline will also be that much closer and so refurb products are likely to be in demand as well. That’s why it’s vital brokers can match their clients’ demands with lenders that can deliver.
Daniel Yeo is managing director of Specialist Finance Centre
