By James Bloom, Divisional Director, Alternative Bridging Corporation.
Ensure you are in pole position to work with the more accommodating lenders when the market picks up again.
In recent weeks, questions have been raised in the trade press on whether now is the right time for brokers to review their lending partners.
The Covid-19 crisis has thrown up a number of issues for borrowers and lenders to deal: as landlords have faced rent arrears, extended their void periods and met difficulties securing exit routes, lenders have needed to adapt their policies and processes to suit the current environment, while also working closely with those existing borrowers who at risk of defaulting on their loans.
Brokers find themselves in the middle, so now more than ever they need to work closely with both lenders and their clients to identify the most appropriate solutions.
Some lenders will be proactive in engaging with brokers, and open to a constructive dialogue about longer-term solutions. Others, however, may be less experienced in dealing with such challenging circumstances, and may unnecessarily close off communication as they maintain a rigid approach to the loans on their books, possibly driven by their funding sources.
If this rings true of lenders with which you are currently working, it is time to review your relationships to ensure you are in pole position to work with the more accommodating lenders when the market returns.
At the beginning of April, EY published what has now become its annual UK Bridging Market Study. It was unfortunate timing for the report, which was launched just as the country was coming to terms with being in lockdown, but was based on research carried out between January and early February before the scale of the Covid-19 pandemic had fully recognised.
However, some findings from the research ring particularly true in the present environment, especially regarding brokers’ consideration in choosing a bridging lender. More than half of the respondents to the survey cited the reputation of the lender as a very important or important consideration, and 46 per cent quoted high-quality service from the lender as a very important consideration, which was an increase from 37 per cent of respondents who reported this same option as the most important last year.
Respondents also identified other key factors influencing their choice of lender, such as certainty of funds, the ability to deliver, and being able to follow through on promises.
These opinions suggest that brokers value certainty of funding, speed and quality of service, and transparency – all ahead of low pricing.
Such ‘back to basics’ principles of lending were already in demand before the emergence of Covid-19. They have since become more important and will be an even greater factor in the future. Choosing to work with a lender on the basis of these principles is not, therefore, a knee-jerk reaction but a positive choice for you, so what should you be looking for?
Experience, expertise and transparency may sound hackneyed, but these qualities will make a significant difference to you and your clients when circumstances change and situations don’t turn out as planned. This is particularly true now, but things go wrong at any time, not just during a global pandemic.
The likelihood is that many of your clients’ circumstances will deviate significantly from their plans, particularly in development finance. When they do, the ability to engage with a lender that is open, honest, and offers experience and expertise could save a lost cause.
Successful broker-lender relationships are built on long-term partnerships an this requires an open dialogue, trust and confidence that a lender will do what it says. If you are making calls because you have been let down by your lender, you should rethink your relationship with that lender.
These are challenging times, but they are also the best times to learn who your friends are.
Start making those judgements and building relationships with lenders that have these qualities in their DNA. If you make these decisions now, you will form successful partnerships that will last far beyond the next deal, and this current environment, and you will be best place to help your clients and grow your business as the market recovers.
Click here to read the full Bridging Watch article in Mortgage Strategy.