The bridging market has historically had a mixed reputation, with reports of some lenders lacking transparency when it comes to fees and charges.
However, this reputation was borne out of a small number of lenders and for most bridging lenders, like London Credit, this reputation seemed unfair. We have always prided ourselves on providing bespoke and flexible financing solutions to suit the individual requirements and expectations of our clients. This means no hidden costs, no small print and no unreasonable lending terms.
Our belief is that transparency is absolutely vital to the success and reputation of the bridging market, where speed and efficiency are critical in ensuring swift loan completion, and that being openly transparent with fees and costs is absolutely integral to achieving this.
Transparency is not just about lender reputation either: the service we provide and the solutions we offer also have an impact on the broker community and the customers they serve. This industry is built on relationships and our customers place their trust in brokers to find the product most suited to their needs; if this trust is broken, then those relationships can be permanently damaged.
Yet despite our best efforts to be open and honest when it comes to conducting business and our product offering, transparency is still lacking in some parts of the bridging loan market, particularly when it comes to the disclosure of fees.
We recently lost out on a deal because the headline rate on our product was listed as being 15 basis points higher than our competitor. At face value, the decision by the broker to place the business with another lender may appear to make sense, but when you read between the lines and add on the unpublicised “lender fee” of 0.5% to our competitor’s headline rate, our offering would actually have been a better and cheaper deal for the client.
This comparison of true cost versus total cost is extremely frustrating and begs the question why any fees attached to bridging products, or any financial services product for that matter, should be hidden or undisclosed at the outset? The true cost is always revealed eventually, so wouldn’t it be better if this information was displayed upfront for the sake of transparency?
Another problem in the market is that there are lots of product-related terms bandied about the market in relation to bridging loans, and these all differ between lenders. This lack of standardised terminology does little to provide greater clarity when it comes to the fees and costs associated with bridging loans.
For example, “lender fee”, “booking fee” and “arrangement fee” are all commonly used terms that fundamentally mean the same thing and are interchangeable between different lenders. This lack of consistency in labelling fees does little to aid transparency.
Another indirect cost of a lack of transparency is the reputation of the broker if they are deemed, through no fault of their own, to have not advised the borrower on the true cost of taking out a bridging loan. Unexpected costs make the broker look bad, so it is important that brokers work with lenders who are transparent to ensure they understand all associated fees and charges involved in the bridging process.
With the bridging market currently experiencing a surge in popularity on the back of rising interest rates and post-pandemic mortgage processing delays, it has never been more important for lenders to ensure they are being open and honest with their product offerings.
Transparency in the bridging loan sector is essential to its continued growth. We need to move away from the traditional views and negative labels associated with the sector and capitalise on the market’s current surge in popularity. Being open and transparent about fees and charges is a step towards achieving this.
Marios Theophanous is credit manager at London Credit