There was a time when the bridging market suffered from something of a ‘one-size-fits-all’ approach, where there was little distinction between the products on offer beyond the headline interest rate.
Marios Theophanous is credit manager at London Credit
There was a time when the bridging market suffered from something of a ‘one-size-fits-all’ approach, where there was little distinction between the products on offer beyond the headline interest rate.
That’s simply not the case anymore, however. The bridging industry is much more competitive now, with so many lenders actively hunting for market share.
As a result, such a vanilla approach simply isn’t going to cut it. Instead, lenders are being forced to take a step back and reconsider how they design their products, and how they can adapt them so that those products better meet the needs of brokers and their clients.
And that fresh approach is leading to genuine innovation. At London Credit, for example, we have recently launched a new Fast & Flexible Refurb bridging loan, designed for borrowers who spot the opportunity to renovate, extend, or even convert a property and then either flip it or refinance to a traditional buy-to-let mortgage.
The product also allows for further advances, which can be considered for additional work without the need for a new facility – avoiding additional legal or other fees. This is particularly useful if new planning permissions are secured on the property during the course of the renovations
Refurb projects are not all the same. There will be times when a project is a lengthy one, perhaps times when it means extending or converting a property to smaller units. Equally, there are plenty of smart investors who spot properties that only need a relatively small amount of work before the properties can be put back onto the market and reap a profit.
Different bridging products will therefore be more appropriate for different clients, not just based on the interest rate being charged but on the structure of the product itself. And that’s why brokers are such a crucial element in the bridging sector. Designing the products for specific sorts of borrowers is only the first step - as lenders, we have to ensure brokers understand those products and can identify the clients for whom they are the best option.
Property investors turn to brokers for help with bridging loans for good reason. They know that the best brokers are on top of the developments in product design, and are able to identify the exact product that best meets their needs, rather than simply picking out a generic bridging loan with an acceptable interest rate. That’s why lenders have to raise the bar and keep innovating, keep coming up with fresh ideas based on the cases that brokers present us with.
Of course, interest rate can only ever be part of the equation. Brokers know only too well that when it comes to bridging loans, there are other factors which are just as important as the actual cost of the loan.
Speed, for example, is almost always vital. Investors want to move quickly when they spot an opportunity, rather than allow the purchase price to get driven up as others realise the potential, and that means working with lenders who are nimble enough to deliver the funding required within a short space of time.
And then there is service. Reliability is enormously important for all borrowers, but particularly investors who need to be confident that the lender will be able to deliver the promised funds on time, and then oversee the loan in a professional manner. That level of service is something we pride ourselves on at London Credit, and it’s one of the reasons brokers keep coming back to us.
There’s an important lesson for all lenders there. As well as taking a more innovative approach to our products, we have to back that up with the fast delivery of funds and top notch service. Given the level of competition in the market today, brokers have no shortage of alternatives if we let those standards slip.
