I sympathise more with brokers than lenders at this moment in time, says Enra's Danny Waters

In the latest Brightstar Industry Vlog published exclusively by B&C, Danny Waters, CEO at Enra Specialist Finance, said that while he was “bullish” about the prospects for the specialist finance sector, he acknowledged that it will be challenging for brokers over the next six to 12 months.

Rob Jupp, CEO at Brightstar Group (featured in the video, top left), hosted the session, which included industry heavyweights Danny (bottom left), Marc Goldberg, commercial CEO at Together (top right); and Buster Tolfree, commercial director at United Trust Bank (bottom left).

While the conversation started around how to build more awareness of second-charge mortgages, the four then discussed how the wider specialist finance market would play out next year.

Buster highlighted the need for brokers to be supported, since they don’t enjoy the sorts of residual income that lenders do.

“We all get interest income applied every month and, [while] payment holidays might have put a bit of a hiccup [on] that over the summer [and] over the months to come, fundamentally, we’ve got interest income to fall back on — the broker community doesn’t have that,” he explained.

While intermediaries live on the commission or fees generated from a set amount of deals being paid out per month, Buster emphasised that both lenders and brokers needed to support each other symbiotically — “without one, you don’t have the other.”

Rob asked Danny what his predictions are for his business and the specialist finance market as a whole.

“I think 2021 is really unpredictable,” he responded, stating that the outcome of next year for numerous businesses would be closely correlated with what happens with regard to the health crisis.

“If we find a vaccination for Covid-19 in the next six months, I think 2021 will be an overwhelmingly positive year, and there will be a bounce for many businesses in the specialist sector.”

He believes that talking about next year is “a little short-sighted” and would instead look at a three- to five-year timeframe. 

“…I’m quite bullish about the prospects, not only for our business, but also for the specialist finance sector,” he added.

“I think we’re going to see [it] grow as a consequence [of] what’s happened over the last six to nine months.”

He predicted that there will be opportunities for “well capitalised, well positioned businesses”.

He stated that the companies which were best positioned to take advantage of these were those that have managed themselves well over the past 24 months and haven’t been “too aggressive” with their lending and risk functions.

Rob asked whether this could result in some “natural consolidation” in the market.

“As this all shakes out, there will be some consolidation in the marketplace,” Danny said, “there will also be failures…

“Brokers don’t have the benefit of recurring annuity income and, therefore, I sympathise [more] with them than lenders at this moment in time, because it will be more difficult for them to tread their way through the next six to 12 months.”

However, he believes many businesses are “much better run” than they were going into the financial crisis, with more robust balance sheets and the experience to react quicker this time around. 

“As a firm and as a group, we want to support intermediaries in particular to navigate their way through this crisis and come out the other side, because that will help our business grow, too.”

Marc expects the specialist lending market in 2021 to get bigger as a result of a potential recession, with customers’ credit profiles affected, and banks being kept busy by government-backed loans.

He is of the opinion that agile specialist lending businesses which can spot an opportunity and focus on customers’ futures and not the past, will do well.

“We’re cautiously optimistic about Together, the marketplace . . . I think [there will be] a lot of twists and turns next year . . . but I think the specialist lending market will grow, and in a way where there will be opportunities and there will be different markets for us to go to,” he added.

“…The new business is quite easy, it’s the back book and the performance and what’s going to happen in the UK that is totally out of our control.

“We just need to make sure that we are positioned as best as we can to help and support the customers being our existing back book, but also brokers…”

The full video, which discusses why many intermediaries still aren’t talking to their clients about second-charge mortgage options, and the challenges employers will have in the next phase of Covid-19 in terms of office and remote working, can be viewed below.

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