A new approach to avoid flooding




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I was surprised to read an article in the week quoting that “Bridging is the new Sub-Prime” because of the way lenders are coming into it rapidly and with increasingly aggressive product ranges. Yes there are similarities between the two sectors but the way the bridging market is financed appears to be fundamentally different – if you are to believe the companies already in this arena.

The facts are that unless you have a specific formula for raising money, meaning you offer little or no return on the cash except when it is out, the business becomes un-scalable and this appears to be the problem faced by some lenders even now.

Bridging is a unique form of funding that has taken on a more global appeal, and it can offer through some lenders a route to raise capital that has not been there for a while, the only drawback being that you get priced according to the risk, or at least you have been up-to now.

My personal concern, and where the author of the other piece may have been heading (I have as yet not read the article) is that so many new entrants may then drive the price down to an unsustainable level giving us bridging products struggling to make money – now that is a big similarity, should it happen. This is good for the consumer in the short-term but means that the whole industry will struggle for financial survival if pricing continues in that vein.

What I am trying to say is that rather than stand toe to toe trying to slog it out in London and the South-East, convince your investors that there is money to be made outside those regions……Some already have and the feedback has been good.

I am not saying lend in every region of the country, not just yet, but consider commercially sound deals you may see from outside the comfort zone, then charge accordingly. I know I am going on about this but it is something that needs addressing. Hopefully we will see some of the newer funders following that route

Couple of things came up this week when a lender asked for two separate forms of secondary proof of address because both names were on the council Tax documents and that’s not allowed. This creates along with many more silly rules surrounding original documents a much bigger waste of paper than is necessary.

I am sure we could get to a point when all documentation is electronically verifiable.

The last point I want to raise today concerns the whole broker market; why do LBG appear to be hell-bent on killing the Intermediaries? I have personally been involved in a few appeals over this panel removal for quality of business; the first one had never done a case but had gone to work for a business that had one consultant who did 4 cases all declined and he was then fired. The broker and the company are still struggling.

The second deal had done two completed cases but had one declined on valuation…..? These two examples give a pretty good flavour of what is happening and they really are trying to finish a few off. Now the mist is clearing on why Nigel Stockton may have left to go to Countrywide, especially as he was always a champion of the intermediary market and a good man to boot!

Does anyone have any other examples they can share? As I feel intermediaries are getting persecuted by this. Views please

Have a good week

Terry

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