Brokers operating in the bridging market are in a fantastic position today. The sector had been booming for some time before the arrival of Covid, and even now has bounced back to the point that some studies suggest lending is at its highest point since 2018.
Obviously, the strong demand from borrowers is the overriding factor here. Even with the stamp duty holiday coming to an end, there is still an extraordinary appetite among property investors to add to their portfolios, recognising the opportunity either to flip those ‘doer uppers’ for a profit, or retain it as an ongoing buy-to-let.
However, the bridging market itself – and the attitude of lenders – is also a big driver here. There’s no denying that the industry has seen a suite of new lenders enter the space over the last few years, meaning that intermediaries have no shortage of choice for many of their bridging clients.
But deciding which lender to go with for a particular case is not necessarily straightforward given the broad range of competing voices out there.
Delivery is key
It goes without saying that rate is an important factor for any broker looking to place a bridging case. They want to ensure that their client enjoys a great rate, reducing the cost of that borrowing and protecting the profitability of the project, whatever it may be.
But rate can never be the deciding factor. Speak to any broker and they will have horror stories about lenders who promised a killer deal but let the client down in the end, perhaps by failing to deliver the funds, or dragging out the process to the point at which the purchase was no longer viable.
Yes, rate is important, but reliability is crucial too. We know from our lengthy experience in this market that brokers and their clients value lenders who they can trust, who can deliver the promised funds in the promised timeframe. If that means accepting a rate a few basis points higher than the apparent market leader, then so be it. What price certainty?
Adding on fees
Along similar lines, the interest rate charged on the loan obviously isn’t the only cost that brokers have to bear in mind when working out which products to recommend to clients. There can also be a whole host of additional fees and charges to include in those calculations as well.
Openness is crucial here. The brokers we work with always emphasise how much they value lenders who are entirely open about all of these charges from the outset.
Building relationships
The property market as a whole is built on relationships as much as anything else, and that is particularly true of the bridging sector. It’s these relationships which can make a big difference not only to selecting who to work with, but also whether a case manages to get over the line in time.
Reliability is a big factor here. Brokers will know the lenders who have come through for them on those more testing cases, who have gone above and beyond to help the client. But it is also about the individuals, the business development managers or underwriters that brokers can turn to whenever there is an issue with a case and get an honest answer.
Crucially, that answer won’t always be yes. But we know that advisers value an honest and understandable response, even if it isn’t necessarily the one they’d like to hear.
Keeping flexible
All lenders – not just those in the bridging sector – want to have a good idea of who they are lending to, and how they are going to use those funds. But if the last couple of years have taught us anything, it’s that plans often have to change, and not just because of something the individual borrower has done.
For example, there will have been some bridging loan borrowers who picked up a property at the start of 2020 with the intention of doing it up and then flipping it, who had no option but to retain it as a buy-to-let once the pandemic hit.
Lenders will inevitably react to these changing plans in different ways. However, brokers will often value working with lenders who can be a bit more flexible and adaptable when the client has to move onto Plan B, over lenders who are a little more rigid.
Having such a competitive bridging market is fantastic for advisers and their clients as it means they have a far greater range of products to choose from, no matter whether their case is fairly vanilla or a little on the complex side. Yet it’s crucial for lenders who want to succeed in this market to listen to brokers when it comes to what they really want from lenders, and deliver not just the products but the service to match.
Marios Theophanous is credit manager at London Credit