"Of course, certainty of funding isn’t the only factor which makes one bridging lender more reliable than another during times of turbulence."
It’s at times like these when bridging lenders can really cement their reputations. With the residential and buy-to-let mortgage markets in far trickier states than 18 months ago, brokers and their clients have turned to other options to fulfil their borrowing requirements, with bridging often leading the way.
For example, landlords have been taking advantage of the speed of bridging loans to seize opportunities presented by other over-leveraged property investors who need to reduce their exposure by selling some of their portfolio.
Equally, the relatively expensive costs of buy-to-let remortgaging have made bridging a much more attractive method of funding refurbishment, releasing equity for other property investment requirements or just giving time to see what is going to happen in the market without being locked into longer term deals with expensive ERCs.
It’s at times of turmoil when certainty of lending is crucial. Of course, not all bridging lenders are the same, and one key area of potential difference is with funding models.
Prior to the 1980s, the mortgage lending market was dominated by the large financial institutions and building societies funded through their customer deposits. The mid-80s saw the rise of centralised lenders such as Citibank, who instead used the wholesale lending markets for their funding. It was from here on that the term securitisation came into common parlance within the mortgage lending industry. These lenders revitalised the UK mortgage market, especially as many of them operated in higher margin/higher risk lending areas and so provided options to those who were previously ignored, finally putting pay to the saying “How do I stand for a mortgage?” “You don’t, you kneel.”
By the late 1990s, the perpetual musical innovator David Bowie securitised the rights to future royalties from his back catalogue bringing the term and concept into the mainstream. But it wasn’t the virtues of Bowie Bonds, it was the vices of the credit crunch that made sure everyone knew what a securitisation was, who would have thought that there would be a Hollywood blockbuster featuring Christian Bale and Steve Carell where the main antagonist is a mortgage backed securitisation.
The credit crunch highlighted how a total reliance on the wholesale markets and securitisation can be a risk if they suddenly dry up. And it continues to be more important than ever to have diverse funding models.
AT HTB, as we are a bank, we have a flexibility of funding which provides a large degree of certainty and enables us to invest heavily in people and processes, while still operating in niche markets such as bridging and development finance.
Concentrating resources
Of course, certainty of funding isn’t the only factor which makes one bridging lender more reliable than another during times of turbulence. Experience is fundamental: if you have senior management who have worked through different economic cycles then they are much more likely to have a coherent strategy to navigate the road ahead and much less likely to panic.
At HTB, we see ensuring a positive and smooth customer outcome as being absolutely imperative and we can achieve this because we have decision-makers who worked their entire careers within the bridging market and are not fazed by less-than-ideal market conditions.
When we designed our bridging proposition last year, we concluded that we would be much more likely to achieve our high service ambitions by having a select panel of proven key brokers who also have a successful track record with bridging cases. It means we can commit extra resource to a case, if necessary, while providing access to the right people at all times: senior management are actually available on the phone rather than behind an email address.
The ability to work in an agile manner is also crucial as it can allow both speed and flexibility with the type of bespoke, high-value transactions that we’re known for and makes a lender much more likely to be able to deliver excellent service levels to their intermediary customers.
Sadly, we are seeing an increasing number of applications where the client has been let down by another lender despite being given the initial green light; a clear sign that our key objective to provide certainty of decision-making and funding isn’t one that can necessarily be provided by all bridging lenders in the marketplace.
