Bridging lender Fincorp has predicted that we could see bridging lenders this year trying to woo brokers with higher procuration fees in order to gain more business.
But the lender has also warned brokers to be wary of this tactic, suggesting that it will ultimately be the borrower who pays for the uplift.
The prediction comes from Fincorp director Matthew Anderson (pictured) who admitted that the bridging market has grown rapidly over the past five years but “has probably reached a natural limit” in terms of straightforward bridging.
He said this growth has led to a much more competitive market for short-term lenders with various new lenders launching into the market even as recently as November 2013. As such, headline rates have dropped while loan to values have lifted.
Following a recent rise in proc fees at another lender Anderson said he could envisage other lenders following suit in 2014.
He said: “Brokers do a great job introducing borrowers to lenders and in some cases they do a considerable amount of work getting cases ready and packaged in a way that lenders are able to assess the deal more easily and quickly. For that they deserve to be paid a decent proc fee.”
But he warned: “I don’t think lenders are inflating proc fees at the moment but I am wary of this as a tactic to take market share when a sector gets heated. That could lead to bad outcomes for the borrower who in most cases will end up paying for that additional income.”
