If you ask most people in the industry about bridging loans, one of the first things they will mention is speed. They are a fast, no-fuss product that gets the job done.
If you ask clients about bridging loans, some may agree with that view. Others, however, may think very differently.
Is this due to unmanaged expectations by their broker, because the broker is genuinely not aware of timescales and the process? Or are bridging loans, as a whole, not as quick as they should be?
Clients miss out when brokers take the easy path
I guess the question is: how quick is quick?
Business development managers for bridging lenders will be more than happy to tell you that their rates ‘aren’t market leading… BUT THEY ARE QUICK!’ Keen to tell you about the record-breaking speed with which they are transacting deals.
When you do a bit more digging about the number of completions they do, the number of underwriters they have, the process of deals and the speed of them, those numbers often look too good to be true.
Seemingly, some lenders have underwriters so busy with completions that it’s a mystery how they have time to deal with anything else.
I don’t think lenders would subscribe to releasing average timeframes for completion
To be clear, there are lenders that are extremely quick. There are tangible reasons behind this, though, such as online valuations, drive-by or re-typed valuations, in-house/joint legal representation and search indemnity. Others won’t offer any of these but claim to be quicker than everyone else, without backing it up.
Brokers have a duty to their clients to be a specialist when talking about a specialist product. This means knowing different lenders’ criteria, different lenders’ processes; as well as their price points.
Too often we see clients having been quoted a lender that is far more expensive than required, but the broker has told them, ‘It’s because they are quick.’
There is a lot more to it than rate versus speed. When you place correctly, you can have both
The clients are the ones who miss out here when the broker takes the path of least resistance, rather than taking the time to educate themselves on how they may make a cheaper product that also fits their client’s needs.
Get what you pay for
Needless to say, there is an increased risk for the lender the quicker the deal completes (more often than not), as it has less time to make the deal watertight. Obviously this comes with a higher price. You often get what you pay for.
The broker’s job is to thoroughly assess the client’s needs and match them with a suitable lender. ‘You need the funds quickly? How quick is quick, and why?’ The lender’s job is to be constantly looking internally and assessing whether its service offering and pricing are a fair reflection of each other.
There are lenders that are extremely quick. There are tangible reasons behind this, though
There is a lot more to it than rate versus speed. When you place correctly, you can have both. You may not get the three-day completion all the time. Sometimes it’s a case of needs must. You must do it. But, when you’re in the know about requirements and lenders’ parameters, you can get the job done at a good price. And quickly.
I don’t think lenders would subscribe to releasing average timeframes for completion — if they did, I wonder how accurate they would be, and in their defence the brokers and clients have a large impact on this and that’s not the lender’s fault.
Maybe lenders and brokers alike need to ask themselves: how quick is quick? What can I do to help make this deal quicker, and then the next deal? How can I make our process quicker? How can I help make the lender’s process quicker?
When you dig, the numbers are too good to be true
Ultimately, how can we all make this product quicker and this industry quicker?
Sam O’Neill is head of bridging at Clifton Private Finance
This article featured in the November 2023 edition of MS.
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