To fee or not to fee

Well, August is upon us already, and here at Brightstar HQ we have enjoyed another bumper month of new business and completions, proving that bridging continues to thrive month on month in 2014...

Section: Opinion

Well, August is upon us already, and here at Brightstar HQ we have enjoyed another bumper month of new business and completions, proving that bridging continues to thrive month on month in 2014, with no imminent signs of slowing. All good for those in the sector, which continues to innovate tough competition between lenders, and is driving prices down all the time – all good for brokers and borrowers alike. 

Just last week, I was lucky enough to attend a lovely meal at Searcys on 38th floor of The Gherkin, (kindly hosted by Duncan & David Kreeger of West One Loans – thank you Gentlemen). Whilst admiring the staggering view across our Capital City’s finance district, I couldn’t help but feel inspired and proud to be part of the bridging community. Perhaps it was the glass (or two) of nice wine, but no matter how many times I look at the London skyline, especially from the 38th floor of an iconic and great building, I can’t help but feel very proud. I chatted with the other guests (mainly other brokers, packagers and property developer clients) about the industry in general and a few specific deals that hopefully will bear fruit in the coming weeks. It was a great opportunity to catch up and network with other property and finance professionals and make some new contacts.
When writing my blog, I always try to be objective and not favour any one lender or product provider too heavily, so as not to show bias. However, I must praise Precise Mortgages in particular this week for launching a brand new ‘fees free’ bridging product. The deal is available only via Precise’s Premier Panel members and boasts a 0 per cent facility fee. The idea itself is not a new one, as there have been a small minority of lenders offering ‘no facility fee’ deals for some time, but that has previously only been possible by those lenders offering ‘fees free’ deals, when the lenders make up profits by charging a higher monthly rate of interest.
Now in some instances, a higher monthly rate with no fee would have been better than a cheaper rate with a fee. The downside would always be that after a short-period of time, the client would be worse off, especially on longer term loans where the lack of lender facility fee is outweighed by the higher rate. The beauty of this new Precise product is that rates remain competitively low. Rather than the standard 2 per cent facility fee that Precise usually charge (along with the majority of other bridging providers in the market place), this product carries no facility fee, and rather than paying the introducing broker / packager the standard upfront commission, it offers an initial payment of 0.25 per cent to the introducer and then a monthly trail commission of 0.25 per cent per month, for every month the loan remains in force (up to a maximum of 10 months). 
Whilst the rate is slightly higher than the equivalent deal with the standard 2 per cent facility fee, it still remains competitive and in many cases will prove better for those borrowers who are confident they will be in a position to redeem quickly. Of course, there will be instances when both scenarios prove better for the client and it will depend on their individual circumstances as to which option is best for them. 
What it does do, is now offer a choice, where they can select either one or the other, depending on how soon they feel they can redeem the loan. This is excellent on the part of Precise for both brokers and clients alike, as once more it shows innovation in the bridging market place and the best of both world’s for the customer who is no longer forced to pay the industry standard 2 per cent facility fee, should they feel the higher rate option is right for them. It is all about choice and treating customer’s fairly, which is something Precise seem to have at the core of their lending principles.
I hope that once more, this will demonstrate to other lenders that TCF has to be at the forefront of their product offering and we see more schemes like this come to market, as other lenders follow-suit. The no-facility fee option is available across standard, light and heavy refurb products. 
 

Source: Bridging & Commercial — https://bridgingandcommercial.co.uk/to-fee-or-not-to-fee