In the UK about 80 per cent of commercial mortgages are arranged directly with banks, with only 20 per cent being arranged through intermediaries.
Peter Caldicott, head of commercial broker unit at HSBC said brokers should offer customers a “one-stop shop” and cater for their commercial as well as business needs.
He said: “It’s too large a market for brokers and IFAs to ignore. Commercial mortgages represent a phenomenal opportunity for brokers and IFAs to not only save customers a significant premium on their commercial mortgage but earn a fair and decent fee for the business.”
Caldicott said the fees for commercial business can be rewarding, about 0.75 per cent for prime business and 1.5 to 2 per cent for non-conforming business, although this only accounts for about 10 to 15 per cent of the market.
Caldicott compared the UK commercial market with not only the residential sector where 70 per cent of mortgages are arranged through intermediaries but also the US commercial market where 80 per cent of loans are sold through brokers.
He added: “Brokers should ask their residential self-employed customers about their needs for a commercial mortgage and what rate they currently pay.
“There is no need for a customer to keep all their eggs in one basket by having everything with one lender – what would happen if they wanted to expand and that lender wouldn’t lend them anymore money? Customers would be well advised to develop a relationship with another bank.”
Philip Hargreaves, northern regional manager at InterBay, added that there were opportunities in self-cert and sub-prime commercial deals, as well as prime.
Hargreaves said brokers typically avoid specialist commercial lending because they fear it is too complex and are concerned they will spend time on the deal but it will fall through and they will not get paid. He also said some intermediaries were unsure of alternative lenders and do not understand commercial clients. Others were too busy with residential business.
He said: “Specialist commercial deals are a fantastic opportunity to get a mixture of residential and commercial clients. There is great income potential - one or two deals a month can equate to £4,000 to £8,000. Moving forward more residential brokers will move into the commercial marketplace so get in there first while there is still opportunity.”
Hargreaves said brokers have the choice of going direct to a lender to arrange a specialist commercial mortgage or go through a packager or network; he added that trade body the National Association of Commercial Finance Brokers (NACFB) could support broking firms and advise them on how to approach the right lender in the right way
He put the size of the commercial market for SMEs at about £40 billion with around £10 billion being classed as non-conforming. “40 per cent of businesses don’t own their own property,” he said. “There are more specialist lenders coming into the marketplace so there is growth as far as lenders are concerned and it should be a considerable growth area for brokers too.”
