The importance of service in a rising rate environment.
While borrowers understandably regard rate as one of the most important factors when looking for a bridging lender, brokers know how critical service is having a satisfied customer.
In the bridging finance market, the more common result of poor service is that it ends up hitting the borrower in their pocket.
The pandemic affected many aspects of the property market, and the bridging sector was not immune. At the present time, external issues are still causing delays in certain aspects of the process, including valuations, the land registry, etc which mean that bridging times have increased across the sector.
Working with lenders that are able to process applications quickly and offer certainty comes to the fore in a rising rate environment. Significant delays could lead to clients missing out on rates and having to pay more.
With this in mind, it’s important to work with a lender whose staff treat enquiries and cases with urgency, in order to lessen the impact of extraneous issues. Equally, lenders who have simple procedures and have designed their decision-making processes to make them as lean and uncomplicated as possible, should satisfy brokers and their clients at a time when others are leaving them frustrated.
Communication is key to good service. Brokers need to be confident that they won’t submit an application to a lender, only to be met with a wall of silence. They are fully aware that a lender’s service (or lack of it) reflects badly on them; indeed, we know that some bridging clients submit applications through multiple brokers. In the event that a lender’s business development manager or broker desk doesn’t get back to them as soon as possible then it’s not just the lender who will lose out on the case but the broker as well.
Of course, the broker has a very important part to play here. They need to ensure that lenders get all the information they require from the outset. Delaying or avoiding supplying particular bits of information – perhaps because they may complicate matters – is not a strategy that will work out well. Bridging lenders are used to dealing with complicated borrower circumstances and should be able to deal with them, but if they are unaware of issues from the outset then it is inevitable that delays will occur.
It's equally important that the broker ensures that their client provides comprehensive answers to any questions that a lender may ask as soon as possible, else the application will not move any closer to completion.
Now, in a rising interest rate environment, time becomes ever more critical. At the time of writing, the Bank Rate is 2.25%, its highest level for 14 years. We saw how markets have reacted negatively to the government’s ‘mini-Budget’ with the rates forecasted to reach 6.0% next year. Recent developments have changed the forecasts but still rates are expected to exceed 5% next year. All this is pushing bridging rates upwards and the last thing a broker and their client wants is a delay with an application, leading to a higher interest rate from the lender.
With that in mind, London Credit offers indicative terms that are valid for seven working days and formal offers are valid for 15 working days for acceptance. There are some cases where timings fall outside of these, but we will always endeavour, where we can, to honour the rate that has been quoted.
Indeed, while bridging has been affected by external delays, that doesn’t mean that lenders can’t make that time up. In terms of service, 2022 has been our best performing year since our establishment 12 years ago. In 2022, London Credit’s portfolio marked an increase of 87% from 01/01/2022 to 30/09/2022. For the respective period of 2021 an increase of 21% was observed. London Credit’s drawdowns in respect of principal drawn down has marked an increase of 146% for the period from 01/01/2022 to 30/09/2022 against the respective period of 2021.
In today’s market, brokers need to work with lenders who they can trust to offer speed of service and certainty,
Marios Theophanous is credit manager at London Credit