It has been, shall we say, an interesting start to the new year particularly in the lending sector and, even at this early stage, I think we can potentially see the formation of some key trends that are likely to continue throughout the next 12 months.
Certainly from our perspective, you can see the start – indeed, we might already say it’s in full flow – of a price war in the bridging market, and this appears to mirror what is happening in many other parts of the market, perhaps most notably in the buy-to-let market where it appears many lenders are fearful of a major drop in lending volumes and are therefore attempting to secure their share of what is left by dropping prices.
I’m not so sure that the same motivations are taking place in the bridging sector – my opinion is that our market will benefit from what is happening in buy-to-let and that we shall pick up bridging business because it is now much more difficult to secure that buy-to-let loan. Indeed, bridging lenders may well be sensing this and the price cuts we have seen in our market may be an attempt to secure the lion’s share of that early-year business that is undoubtedly available.
It should perhaps come as no surprise to an industry built on a fast turnaround and quickness of delivery, but bridging lenders are certainly not wasting any time when it comes to changing rates and reacting to the moves of their competitors. You may well have seen a raft of quick rate changes from the likes of Masthaven and Precise in recent weeks as the monthly rates of some of their bridging products were dropped in quick succession to below 0.5% per month.
Advisers who are perhaps not so au fait with the bridging market may well look at this and wonder how you ensure you get the best deal available, especially when a) change is so fast, and b) when access to the very keenest of rates is only available to premier distributors. For example, when Masthaven dropped its bridging rate to 0.49% it was only accessible to key relationships like ourselves and therefore clients who might be aware of such opportunities are only going to get access to these deals via certain routes.
Luckily for advisers there is nothing stopping them introducing these cases on to brokers like ourselves who will happily source, place and package the deal to ensure the client not only gets the best rate but gets the best service. The introducing broker will still pick up the same commission, plus any fee that they would have secured by going direct – that’s if of course they can get over the threshold with these lenders.
And that’s a very important point when you consider the ‘rate war’ happening right now in the bridging market. It’s clearly very positive for your clients to see lenders competing for business and actively pricing at these low rates, however it’s only of real benefit if you can access these deals and, unfortunately, these tend not to be ‘catch-all’ offers that are available right across the advisory space. Instead, lenders want to work with their preferred partners who they have a shared history with and who they know can deliver the quality of cases they require with the minimum of fuss.
In that sense, we fully expect the price war to continue with more lenders joining the fray – plus some peaks and troughs along the way – however advisers with potential bridging cases should not assume they’ll have access to them all. In that sense, it will pay to partner with a broker who does have that status with these lenders and can not only access the rates, but can present the deal in a way which gets it accepted.
Overall, 2017 has kicked off in bullish fashion for the bridging market and we await the next steps in the battle for business with a great degree of interest and relish. Now certainly seems like a time when bridging clients can access some very good deals.
Jonathan Caplan is director of First 4 Bridging