It has become clear that certain lenders are currently still intent on doing things the good old way.
Money Partners Touch, Beacon Homeloans and Preferred Mortgages are all for traditional underwriting and should be applauded for that, as brokers need to help all their clients.
That said, few would argue that BM Solutions and GMAC-RFC’s technological solutions give help to 75 per cent of the cases in their respective markets in a timely fashion – and as their historical data mounts, they may be able to re-adjust their score cards to capture a higher percentage of good payers, marginalising the need for manual underwriting even further.
get the daily news delivered to your inbox
Dare I say it, we might one day see irresponsible lending as an attempt to take the whole of the market, rough or smooth, online.
Last year I was quizzed by a number of residential lenders looking to enter the commercial market. Among the existing account managers, their factfinders included former industry names bought in for consultancy at a cost.
It seemed at the time their tentacles were being thrust out by their owners in a quest to discover a new world with margins in it, rather than necessarily driving the projects themselves from within and because of this the ‘doers’ have stalled.
2007 appeared to all intents and purposes to be a year for the ‘commercials’, but this has yet to happen. Most of the interest was to centre on replicating the successful Commercial First and Interbay models designed, in the main, to provide finance for sole intermediaries who have very light adverse problems and difficulty proving their income.
Existing residential mortgage introducers were selected as the target audience to pedal the finance. As such, the lenders’ focus was on ‘boxing up’ the underwriting complexities in a palatable way to allow introducers to migrate without too much education. As a consequence of the design the foundations have concurrently been laid for automated decisions.
catch up on the industry buzz
So here we sit looking in at a ‘new world’ for many of us, where the starting point conversely is where the residential market has ended up – very light self-cert adverse with instant decisions. This, on the face of it, is really appealing.
However, I do urge caution to potential commercial converts that Commercial First and InterBay only provide part of the solution and my concern is that prime customers may get sucked into the net as the process is so much easier than the traditional commercial providers. As such, there is a potential mis-selling scandal as the rate differential is significant as new lenders have yet to emerge to challenge Commercial First and InterBay to put prices under pressure.
My advice is to form links with existing commercial brokers until your knowledge is enhanced, as they will be able to provide a full service from prime full status to the end of the risk curve.
To conclude, if I was working as a careers officer, I would strongly urge you to embrace the commercial market for two reasons:
- Job satisfaction – the old grey matter and experience counts. These attributes are being worn thin in the resi-market.
- A job for life – the possibility of the lender being able to cut you out the food-chain via a one-minute mortgage consumer website is pure fantasy as the market is so diverse and Commercial First’s solutions just scratch the surface.
News Sector Update
Mainstream
Pubs appear to have been downgraded to higher risk – given concern regarding the smoking ban coming into effect in July.
Short leasehold finance remains elusive and remains a difficult sector – applicants ideally need 25 years remaining to get support.
Land without planning seems ever popular for ‘punters’ but less so for lenders – expect 50 per cent loan-to-value (LTV) and you need evidence that you can cover interest until planning approved.
Land with planning is attractive to various lenders but commercial units –not pre-sold or pre-let prior to build commencing – are harder to place.
Business owners looking to buy their own freehold remain attractive to a range of lenders and some will go to 80 per cent or more – possibly 100 per cent for the right applicants.
register for 'adviser finder' here
Dentists and other professionals are sought after by all lenders and unusually high levels of unsecured debt can be obtained.
Near-prime
Business Lending has repositioned its offering, closer to prime.
Self-cert and adverse
Commercial First has improved its additional borrowing facility – enabling fast drawdown – within a week.
London and Scottish has improved its fast-track system to £200,000 enabling minimum conditions and interest only for the term of the loan.
Interbay has reduced the rate payable on its lower LTV loans to make it more competitive.
find the latest house prices
