These are good days to be a mortgage intermediary. Commercial mortgage lenders are offering businesses a wider range and choice of loan product. The market opportunities for business people are increasing rapidly and the value of commercial property in most areas of the country has risen markedly. Intermediaries now have the opportunity to branch out and develop new business streams by being at the forefront of the distribution of commercial mortgages.
The market for commercial mortgages, long the preserve of the traditional banks, has been shaken up by the establishment of a new breed of commercial lender, which has recognised the benefits of working through the intermediary channel. We only have to look at the rise of the non-conforming residential mortgage market in the UK as a testament to the success of the lender and intermediary partnership over the past 10 years.
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To those trailblazers who were established before 5D launched, I have two messages. Firstly, I congratulate you on your success. Secondly, I trust you will welcome the competition that 5D and other new entrants represent as a positive trend that will promote the growth of the industry and increase the competitiveness of the offering to all customers. The expansion of the market will benefit existing lenders as well as the business customer and the commercial mortgage adviser. The added dimension, which new lenders such as 5D provide, demonstrates the benefit of more choice, while at the same time providing added momentum for clients to seek out a broker.
5D Finance is committed to working with brokers to build our offering to the business customer. Our aim is to provide, in partnership with key brokers, a consistent and timely service backed by the highest level of technical competence. As we develop our relationships with our distributors, we will aim to increase the range of products and the distribution channels that we employ. As the market develops, we will leverage our capital markets expertise to increase the range of pricing that we offer and the properties and businesses on which we are prepared to lend. As the quality of information on small and mid-market commercial property improves, we will aim to offer business customers the benefit of finer pricing.
This will lead to an evolution in the way in which commercial mortgages are priced and a more competitively priced market as a result. We refer to our approach as ‘granular risk-based pricing’, and it reflects our belief that the ‘one size fits all’ method of pricing used historically is far from the best option.
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We live in an increasingly regulated world and, although the commercial market remains outside the compliance envelope, the concept of ‘Treating Customers Fairly’ (TCF) is rightly becoming the standard by which transactions will be judged in future. The growing number of choices that brokers have open to them, with the arrival of lenders like 5D, means the need for brokers to demonstrate that they have researched the market rather than simply opted for a familiar lending resource will become more important. Make no mistake, it will be vital for brokers to ensure they do not fall into the trap of adopting a one lender solution, when there are growing numbers of lenders from which to choose. Given the history in UK financial services for retrospective reviews, it is not beyond the bounds of possibility that even without formal regulation, brokers would have to justify their past choices in the event of a future commercial mis-selling review.
At 5D, we will be working with a wide range of partners and would urge brokers to remember that the market is evolving and with the arrival of new players, the choice of provider is a double-edged sword. On the one hand, it gives the broker more choice; but it also requires a greater degree of research to be able to demonstrate that the recommendation is the best that the market can provide. The days of doing business with a few dominant providers in the commercial market is coming to an end. Welcome to the competition.
