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Bridging Watch: Battle lines are drawn in rates wars

Fairfax_Chris-(Jan16)

Competition for high-LTV bridging loans is strong, coupled with lower pricing for higher LTVs from ‘lighter touch’ lenders

Every day I’m bombarded with emails from bridging lenders and master brokers (including our own) advertising “market-leading rates”.

Introducers must now be aware that Precise Mortgages and Shawbrook Bank offer rates from 0.59 per cent per month for borrowers seeking less than 50 per cent LTV. In fact, other lenders, mostly regional building societies, offer lower rates of interest but they tend to be highly selective and the application process is painfully slow and often results in a poor customer outcome or no mortgage offer at all. Less marketing is focused on the higher LTV section of the market which is highly likely to account for a greater percentage of loans written.

So-called rates wars between banks with access to retail deposits have, again, been regularly commented on in the press and discussed at industry meetings. Only this week Masthaven Bank has released a rate of 0.55 per cent per month for premier panel master brokers for loans below 50 per cent LTV and I’m confident this will be big news.

Less attention is given to competition at the other end of risk curve and certainly less marketing promotes these rates as the message is lost in a sea of communication. Rates from 0.59 per cent are more memorable than 0.89 per cent for 75 per cent LTV. It is true we all have a tendency to believe lower rates are more valuable to us for business purposes and focus on storing this information. If a lender focuses on publishing higher LTV rates intermediaries might not know how these compare with others and may not appreciated their value. With low rate marketing, intermediaries seldom or never hear of rates being lower so immediately appreciate the value.

At present, competition for high LTV bridging loans is strong. With increasing pricing pressures for low-risk loans, lenders are keen to maintain higher average book returns by winning higher risk lending opportunities. Certain lenders that do not have availability to cheap capital are forced to compete in the high LTV end or face the very real possibility of not lending at all. This is good news for bridging customers.

Key partners or Premier Panel brokers now have access to the lowest rates in memory for lending to 75 per cent LTV. LendInvest has recently completely repriced and now offer loans to 70 per cent LTV at 0.74 per cent per month and 75 per cent at 0.89 per cent per month. Masthaven Bank offers 0.85 per cent per month to 70 per cent LTV. MT Finance offers 0.89 per cent to 70 per cent LTV. To put this in perspective Precise offers 70 per cent LTV at 0.84 per cent per month and 75 per cent at 0.94 per cent per month and Shawbrook offers 0.69 per cent per month for 70 per cent LTV and 0.89 per cent at 75 per cent LTV.

Possibly more important than competitive pricing is the availability of lower pricing for higher LTVs from lenders that offer “lighter touch” underwriting, focusing more on the asset and strength of exit. This can potentially remove the need for three months in bank statements and proof of income. In the case of MT Finance most loans are written on a non-status basis, with asset quality and liquidity being most relevant in lending decision.

Although not strictly a bridging product, InterBay offers a great “developer exit” product which allows 67 per cent net with a further 12 months interest to be rolled up for applicants who hold completed schemes and wish to refinance more expensive development finance until the property has sold. Interest 0.75 per cent per month.

Intermediaries focused on term residential and BTL mortgages will find it difficult to maintain up-to-date insight on bridging finance when they have a vast amount of information to digest for their core business and no real bridging sourcing system is accurate enough to give meaningful feedback in the same way as the term debt market.

All the above products are available to key partners only so make use of your selected master-broker for specialist products. Often the rate will be lower, you will be given expert advice, good master-brokers will be willing to provide a recommendation and advice to your customer where you may lack knowledge or confidence and commissions are the same or higher compared with applying directly.

Chris Fairfax is managing director of Positive Lending

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