Is the bridging boom affecting service?

Is the bridging boom affecting service?


Recent recession woe has lead to a myriad of doom and gloom updates – you can’t turn a corner without walking into a ‘deficit’, a ‘eurobond’ or maybe even the odd ‘Greek crisis’.

Proect Merlin hasn’t really lived up to its initial promise – who would’ve thought it? – the US has had its credit rating downgraded and now Morgan Stanley have warned of an impending worldwide double-dip recession after slashing their growth forecast.

Stoking fears of the dreaded double dip, the banking giant said the world's economy is "dangerously close to a recession" and cut its global growth forecast for this year from 4.2 per cent to 3.9 per cent, according to the Guardian.

Between the spectre of double-dip and a Eurozone debt becoming more out of control by the day, you could be excused for looking up to check the sky is not careering towards you.

Well, you would if traditional lending was the only option. These tortured souls need only take a sideways glance towards the bridging sector, where the only things falling out of the sky are rays of sunshine on some serious making of hay. In a couple of years, according to bridging lender West One Loans, it’ll be over £1bn worth of hay.

This prediction came off the back of figures that showed an increase of 7 per cent gross loan value since late 2010. If that growth is projected over the next couple of years then the £1bn mark will be breached.

Duncan Kreeger, Chairman of West One Loans, doesn’t believe an influx of new lenders will affect his company’s business and that bridging finance’s older hands will still be seeing the majority of the business: “There have been some new lenders coming on the the market, perhaps sensing an opportunity or two. However, in the main, they are independent firms with limited funding capability”

One new lender in the bridging market is Cashlever and Director David King explains why the bridging market was so attractive: “Bridging finance offers a relatively attractive income return whilst mitgating risk.

“This complements our commercial real estate fund which offers lower annual distributions but with capital growth potential.”

With an increase in bridging lenders, it must be difficult to stand apart as a newcomer to the market. David King believes his company has what it takes to maintain service in a sector that is growing ever more competitive:

“By sticking rigidly to our existing procedures, we know that we can meet the time requirements of most borrowers - we are prepared to be honest and reject applications at an early stage if we feel we will not meet a borrower’s timetable.”

Lucy Barrett, Director at Vantage Finance, agrees bridging is becoming more popular: “Bridging has increased in popularity since the difficulties in the mainstream markets, and more intermediaries are starting to incorporate bridging into their portfolio of products which they offer to their clients.”

Yousouf Roze, Director at First 4 Bridging, concurred and suggested bridging lenders may be feeling more confident about the market: “Since the beginning of this year there has been quite a lot of competition on rates and, in the last few months, more competition on LTVs.

“This probably reflects a bit more confidence, particularly in certain areas of the country. Perhaps those areas are where it is a bit of a no-brainer really but at least people have started to put their foot forward,” he added.

With all this new business coming in and the increase in competition, has there been a drop in price?

Lucy Barrett commented: “As with anything, competition drives pricing down, and we have seen some very low rates especially at the lower LTV ranges which of course reflects lower risk.”

Yousouf Roze added: “I don’t remember the rates being lower than where they are now, certainly not for the attractive LTVs in the good areas.

Competition is good because it drives a better priced product. So it works in the client’s benefit that there is more competition amongst lenders.”

With prices dropping and business growing there can maybe be concerns for a greater workload affecting the level of service that is available, which is crucial in such a time centred industry.

Yousouf Roze does not think that is necessarily so: “Maybe in one or two instances the volume of business is perhaps such that companies are finding it a little bit difficult to keep to those standards and turnaround times.

“With the increased competition of new lenders coming in to the market place they are very soon going to realise they can’t let those standards slip just because they’re getting a lot of business in.”

Duncan Kreeger believes that established lenders are best placed to deal with any issues that may arise with a large increase in business: “Brokers want established and proven lenders who can deliver funds quickly.

“Results always bring repeat business and we always get results. But there are also key differentiators that mark us out of the pack. We now have a strong brand identity, a growing national business development team and some innovative products on offer.”

Lucy Barrett is in agreement that more business and lower prices does not necessarily mean a drop off in service: “Service can be maintained provided the resource and structure is there, so it isn’t a direct result of the bridging space becoming more buoyant in my opinion.

“If a company suffers with service issues generally they will of course find it difficult to manage increased volume, but there is no reason why they cannot grow with the market and address potential service issues as they arise.”

What if brokers are faced with a choice of a lower rate but lesser service?

“Both are crucial, but headline rates mean nothing if they cannot be followed through and deals potentially lost as a result. If you have two lenders to choose from, and one is more expensive but you know will fund quickly without a struggle it’s likely to be the lender of choice,” said Lucy Barrett.

Duncan Kreeger was sure what brokers’ would choose: “West One's success has always been the close relationship we have with our brokers. At the end of the day, it is service and delivery that counts, not lower pricing.”

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