The bridging market is continuing to face unprecedented times.
Recent research shows that the bridging market witnessed a 45% fall in gross bridging loan volumes in the first half of the year, as demand was hit by the Covid-19 lockdown, according to the latest Bridging Trends report.
In the six months to the end of June 2020, bridging loan volumes declined by just under £167.88m to £202.26m, compared to £370.14m of transactions in the first half of 2019.
Contributor bridging loan volume stood at £122.86m in Q1 2020, falling sharply from £180.94m in Q4 2019. Activity then further reduced in Q2 to £79.4m, mainly due to the pandemic.
This is in stark contrast to the growth in short-term lending last year and the boom in new bridging lenders entering the market, thanks partly to institutional investors looking to take advantage of the good returns offered by short-term lending.
Over the last few months, lenders have cut their product range and reduced their LTVs, but demand for short-term lending has returned.
During the last few months, we have had a steady rise in applications for residential property.
The Bridging Trends Report shows that refinancing a bridging loan was the second most popular use for bridging finance, contributing to 13% of all lending in Q2 2020, up from 8% in Q1 2020 and 11% in Q4 2019, a marginal increase which points to strong investor demand
Indeed, there are signs that the BTL market is recovering. The number of landlords looking to increase the number of properties they own has leapt by 71% according to research by The Mortgage Lender.
The research shows that 19% of landlords intend to increase their portfolios over the next 12 months compared to 12% who were looking to add buy-to-let properties in April last year.
Even though 35% of landlords see COVID-19 as a problem, the research suggests that it has made no difference to the investment plans of half of investors, whilst 25% said it had changed their plans somewhat and another 25% said it had changed their plans completely.
So now more than ever, lenders need to expand their product offering and have a focus on service provision.
To stand out from the crowd, lenders should be increasingly looking at their distribution network, service standards and process technology to better serve brokers.
Having a clear, transparent and honest business process that brokers understand and can relate to plays an important role in lender differentiation and this will form the bedrock on which mutual business relationships are built.
Trust Can Build a Network
We’ve seen a number of service and conduct recommendations making the headlines for lenders and brokers to improve clarity of communication and transparency in the bridging sector.
These are to be welcomed as they ultimately broaden the appeal of the sector and will drive awareness of short-term lending as a credible funding pathway to property acquisition and renovation.
This has to be a good thing for everyone in the market and builds trust for more brokers to see it as a mainstream choice for their customers, resulting in an increasing network of loyal participants in the market.
BDMs Can Open Doors
The importance of an experienced, knowledgeable and established Business Development Manager cannot be underestimated.
For brokers, working closely with Business Development Managers helps to not only assess cases, but also progress them.
Acting as a central point of contact, they can and will liaise with introducers and internal underwriters to progress cases to completion and just as importantly, open up new avenues of business.
BDMs can also play an important role in educating brokers about niche criteria which will also have benefits, as there may be a case a broker is having difficulty in placing, but by talking with a lender with the right experience and products will help get a case placed.
So, a consistent communication programme can help make brokers aware and lending could be progressed as a result.
Technology Can Help
Technology can also help process and deliver a better service experience and a more efficient customer journey.
Through the use of Application Programming Interfaces (APIs), a seamless flow of information from initial data capture to final funding can be facilitated quicker and minimise administration time in gathering the required information so better quality time can be spent on underwriting key decisions for a loan.
The use of automated case tracking updates through portals is growing and can result in a more thorough approach to lending and enhanced service.
Open Dialogue and Realistic Aims
By maintaining an open dialogue, lenders can be perceived as approachable and be the first port of call for brokers rather than further down the list when a complex case comes along.
This can provide a distinct competitive advantage for lenders and lead to further business.
This is why it’s important for lenders to ensure that service quality is embedded in their culture to ensure that no possible case is overlooked where lending may be possible.
In business, being realistic from the outset and doing what you say you will do seem simple enough principles, but can be difficult for some lenders, unless they form part of the brand philosophy and the service standards the business promises to follow.
As we know every bridging case is different, so a quick and realistic assessment will help determine what is required to get the lending process started.
There would still be things to check such as affordability, exit strategy and credit checks, but a ‘can do’ attitude can help build confidence in the service the lender is providing.
Many lenders should also follow the codes of conduct proposed by industry bodies such as the ASTL and NACFB (of which London Credit are members) which help to instil confidence in new brokers when they approach a lender.