I attended a wedding this weekend and, as the designated driver, ordered myself a shandy. The bartender proudly presented me with a bottle of lemonade — nothing else.
Now, it was the young man’s second day on the job so, after a polite explanation of what a shandy actually was, I walked away happy (albeit slightly intrigued as to what I might have received had I ordered a Bloody Mary).
We’re well aware the service industry is struggling to get standards back to pre-pandemic levels. It was forced to lay off its experienced staff, many of whom found Monday-to-Friday nine-to-five jobs and subsequently decided to not return to the sector.
As intermediaries, now is not the time for us to play the blame game
Specialist lending is also facing service issues following the recent market rebound. Some of the delays are with surveyors and solicitors but the majority sit with the lender administration teams. We’re experiencing hold-ups in responding to decisions in principle, assessing documentation and providing underwriting decisions.
Pent-up appetite
Who’s to blame for the extensive backlogs? Could lenders have been better prepared to prevent this choke point?
For starters, we’ve got pent-up appetite for commercial applications. No lender wants to put its head above the parapet and be the only one offering deals, inundated with enquiries and damage to its reputation.
More than ever, as a specialist broker it’s important to package cases with the ‘right first time’ mentality
Fortunately, several lenders have come in with good products and an appetite to lend but they don’t all have the infrastructure to deal with the volume. From the outsider’s perspective, a lack of strategic planning could be levelled at some.
There are issues with recruitment. Bringing in more staff won’t fix the problem in the short term; even an experienced residential underwriter will take time to adjust to the complex nature of commercial lending.
Some may argue the work-from-home model, which is especially prevalent in the legal space, is exacerbating the issues, causing delays in communication and collaboration.
Guns blazing
Two years ago, the biggest specialist lenders were slated for pulling out of the commercial market. Yet those same lenders have come out with guns blazing recently, and they should be commended for their gamble to take market share. They could have crept back in with high interest rates and selective criteria, which would have served to frustrate the market even further, in my opinion.
Brokers that dabble in the specialist space should consider working with someone that knows their criteria
We’ve also seen global commercial lenders dip their toes in the intermediary space, which is only positive news for the sector.
To answer my earlier question, as intermediaries now is not the time for us to play the blame game. We could huff and moan to each other and rant down the phone to lenders, but this would be as productive as sending a sternly worded complaint to the passport office.
That’s not to say we shouldn’t offer constructive feedback further up the chain. These products were offered with good intentions and it’s important to make sure management is aware of what’s happening on the ground. After all, we’d rather have competitive products to position than none at all.
No lender wants to put its head above the parapet and be the only one offering deals
We hope all lenders will remain open minded to helpful feedback. We hope all lenders manage their flow of business through well-considered rates and criteria. We hope all lenders monitor and communicate their turnaround times effectively.
More than ever
More than ever, as a specialist broker it’s important to package cases with the ‘right first time’ mentality. More than ever, we need to manage our clients’ expectations on turnaround times. Brokers that dabble in the specialist space should consider working with someone that knows their criteria. More than ever, we need to make sure our intermediary house is in order, for the benefit of our own businesses but also the ripple effect that poorly packaged cases have on the wider market.
We’ve seen global commercial lenders dip their toes in the intermediary space, which is only positive news for the sector
Call me naive, or the eternal optimist, but I like to believe we will quickly get through this with a mature approach to communication and self-improvement on all sides.
Am I concerned about what commercial lending and the broader UK economy will look like in 2023? Certainly. But I can’t control that so my mindset is, right now, I’m greatly enjoying a half-full glass of shandy…. It just may taste like lemonade for a while.
Peter Williams is chief executive of Propp
This article featured in the July edition of MS.
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