In reality, it was more luck than judgement when it came to choosing my own residential mortgage and luckily, at the time, I was able to obtain a life-time tracker rate at well-under 1 per cent above Bank Base Rate.
No reversionary rates – just a low base rate tracker for life. I was also able to take an interest only mortgage, despite the 85 per cent LTV mortgage I took at the time (I have since switched to repayment).
Of course this was all pre Credit-Crunch when it was relatively ‘easy’ to obtain mortgages; to look back and think that in the adverse / sub-prime sector that we previously operated in, people with recent mortgage arrears, unlimited CCJs and defaults were still able to obtain high LTV mortgages, on a self-cert basis, with a drive-by or desktop valuation, and of course interest-only was available to all, regardless of any proof of a suitable repayment vehicle. What could have ever gone wrong?
Of course hindsight, as they say, is a wonderful thing. It is easy to look back now and it is glaringly obvious where things went wrong. What we mustn’t allow to happen is to not learn from our mistakes and in the main, I believe the industry has learnt.
High street lenders in the mainstream channels remain cautious, perhaps too cautious.
MMR has meant stringent affordability checks, with both LTI and LTV caps have meant borrowers needing larger deposits to get on to the property ladder.
The specialist sector, (in which I include bridging finance), has in my opinion hurtled forward from its early, dark-ages (just 4 or 5 short years ago in bridging terms), to being light-years ahead of the rest of the main-stream mortgage market.
Underwriting (in the main) is carried-out by people, not computers. We rarely get a ‘computer says no’ response that is so common on the high street, who base decisions on computer generated credit scores or nonsense affordability checks that would have someone’s mortgage application declined because they pay for two trips a month to the hairdressers, rather than the one that the ‘average’ borrower is allowed, or because of gym membership, or whatever other nonsense I have heard brokers complain about in the post MMR mortgage World.
Access to real-people, who are specialist in their product area, with access to the key decision makers, is what makes bridging so great and IMHO so much better in many ways than mainstream mortgage lenders, who have gone way too far to be cautious, terrified of how the regulator may come down on them if they relax criteria and make sensible loan offers again. The human-touch and also the way the bridging community considers a new loan application.
It is very much on a case by case basis. It is not a high volume arena. Each deal is unique. It must be considered with its merits and demerits. Pricing should reflect risk. The rule-book should be flexible and allow principle lenders the ability to ‘take a view’ on a deal, to fund it, despite there being an issue with building regs, the title, an absent freeholder, rights of access or some other reason that means it would otherwise be an instant decline if it were a mortgage.
This is why bridging lenders exist, to fund deals that are not suitable for mortgage funding, until longer term (in most cases mortgage funding) can be arranged.
Talk to your specialist for further information on how bridging finance can work for your clients.
By Kit Thompson, Director of Bridging Loans at Brightstar
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