A commercial lender has this week revealed the issues that concern the broker community most, since embarking upon a communication initiative to understand what brokers want. The lender, Aldermore Commercial Mortgages, has hit many a headline lately with its drive to inject growth into the SME sector and continues to expand its offering at a phenomenal rate. 

With this in mind, Rob Lankey, Managing Director of Aldermore Commercial Mortgages, has given B&C the exclusive insight into the broker research it has been conducting and advises how lenders can turn an initial ‘no’ into a ‘yes’...

We all see articles in the press which give an authoritative view on the state of a market based on the results of detailed research.

As helpful as such reports are, I’ve always felt that they are no substitute for hearing feedback first-hand from the people who spend their working lives in those markets. I therefore try to make time to get out and about and have a chat over coffee with brokers across the country, who introduce business to Aldermore. It’s a great way to really understand what the issues of the day are and what’s preying on brokers’ minds.

Over the past few weeks, I’ve had plenty of chats (and cups of coffee!) and feel as if I’m developing a pretty accurate picture of what brokers want from commercial mortgage lenders. So, what did brokers have to say?

Perhaps unsurprisingly in hindsight, three key issues kept regularly recurring over my cappuccino.

The first was the issue of managing clients’ pricing expectations. At a time when the BoE base rate has remained at 0.5 per cent for more than three years, some borrowers expect the pricing of mortgages to be at similarly low levels. However, the key components which influence a lender’s pricing strategy are the price it has to pay for its capital, the cost of providing a service and the degree of risk inherent in the borrower’s application.

The cost of capital is a key consideration. Most lenders are heavily dependent on retail savings at the moment and savers are understandably looking for the best return for their hard-earned cash. As a lender, our cost of capital is just the starting point; we then need to add operating costs, a profit margin and ensure that the pricing of the deal fairly reflects the risk to the lender. I can appreciate why borrowers are disappointed when they discover that lending rates are not as close as they expected to the bank base rate. However, in consolation, the cost of borrowing money is lower today than it has been for many years.

The second point which recurs regularly is brokers’ desire to work with lenders who are happy to talk through the details of a case and be willing to find a solution if a case is not an immediate fit. They get very frustrated when an application is submitted to a lender, only to be given the answer ’no’ without any explanation.

I have to say, I’m equally as perplexed by this attitude as brokers are. It baffles me as to why a lender would want to go to the trouble of processing an application and then turn it down without first finding out if there is any way of overcoming the issues which make the deal unacceptable.

I know only too well that every now and again a case will be submitted which is a complete non-starter. In those instances lenders need to provide a quick explanation so that both the borrower and broker can move on. But I also know that in an awful lot of instances a bit of additional work can turn what at first may appear to be a ‘no’ into a ‘yes’. A bit more information or rethinking the structure of the deal can be enough to generate a positive result. And that’s precisely what brokers want lenders to do: be willing to engage with them to establish if a solution exists.

And finally, the third point is that brokers also want a timely response, even if it’s a ‘no’. In fact, especially if it’s a ‘no’. There is nothing more frustrating than waiting weeks for a case to be appraised without any word as to precisely what’s happening. Regular feedback is essential if brokers are to successfully manage their clients’ expectations.

If truth be told, commercial mortgage lenders have hidden for far too long behind a smokescreen of excuses that ‘commercial mortgages are complicated’ and ‘each case is different’ and ‘we have much more information to appraise than a simple residential mortgage’. All of those facts are true, but it doesn’t mean that lenders can’t provide a fast, efficient and flexible service.

Over the past year we’ve invested time, money and an awful lot of effort at Aldermore in developing the UK’s first truly automated commercial mortgage broker portal. The benefit it delivers isn’t just that it gives quick decisions and enables brokers to know precisely what’s happening to their clients cases, but it also frees up our skilled staff to spend more time helping brokers craft those cases that do need a bit more individual attention.

What else have I learnt over a cup of coffee? Harry Redknapp should be the next England boss; the Aston Martin Volante is the ‘must have’ car; politicians don’t know what they’re talking about... You know, the usual stuff!

Research may be reliable, but face-to-face communication is critical if you want to remain grounded and really understand what the issues of the day are!