Specialist finance needs specialists
It is generally accepted that when it comes to property finance, anything outside of your vanilla residential mortgages is deemed as specialist. I guess this is because there are more moving parts, is slightly less criteria led and slightly less off the shelf. This is also fair to say for bridging and development finance.
However, there are some lenders in the bridging market who are fairly criteria driven, you could argue “tick box”, but this gives them the license to lend at market leading rates and be selective about the deals they wish to fund. Their margins are likely the smallest, so that’s their prerogative. Then there are the lenders at the other end of the spectrum which lend at much higher rates but are a lot more flexible and seemingly laissez faire about their approach to risk– seems straight forward, right?
That being said, some lenders are more rigid than even their low rates give them license to be, and some lenders are far pricier than their product offering should indicate. The art in broking currently, is understanding which lenders are offering low rates but can be flexible on certain criteria you know you may need them to take a view on, and which lenders will definitely do a deal, but you are adding extra cost to the client’s bill when you could go somewhere cheaper. You can see, things are getting a bit more complicated.
Now add to the mix that given the current rollercoaster ride of the UK economy, but specifically swap rates and subsequently, interest rates which are the topic here, this means criteria, risk appetite and costs are always changing across the market. It’s a lot to keep up with!
This is where clients need brokers to be savvier than ever and trust that they will pair them with a lender which best suits their requirements. Well priced lenders and fast lenders don’t have to be mutually exclusive, yet well priced lenders, fast lenders and flexible lenders may not all come in one package (depending on the level of flexibility required).
An experienced broker can help borrowers find the right lender for their specific needs. A riskier deal will generally come with a higher price, and I don’t think there has traditionally been much argument about that. However, the cost needs to reflect the risk.
A client may save money up front by seeking out a broker who will do the deal for as cheaply as physically possible for their advice, yet if their advice takes the client to a lender who isn’t best suited for them, they will lose out in the long run by paying more than they needed to. Are brokers pricing correctly?
That’s for individuals to decide. There is (and always has been) a big debate about brokers charging fees and whilst there is some truth to the phrase “you get what you pay for” that doesn’t mean clients should be overcharged.
Good brokers are not only able to pair customers with the best lender for their deal, but also clearly explain to them why they have done so and confidently justify their charges. With Consumer Duty just around the corner, fair pricing and full justification of lender selection will come under greater scrutiny than ever on regulated deals.
Various surveys seem to suggest some brokers are more ready for that than others but those who feel they are already doing right by their customers shouldn’t have anything to fear.