Comment: Can DIY match the specialists?


Packagers come at a cost so, if you are familiar with the specialist product area in question, why not go direct?

The bridging market has grown a lot over the past year, despite Brexit, Donald Trump and a falling pound, all of which have left the world in shock.

For brokers who want a bridging loan (or any other form of specialist loan), the default route is to go to a packager or master broker. In doing this, however, they could be costing their clients more than by going direct to a lender.

Since the Mortgage Credit Directive, some second charge lenders have cut out the middleman by setting up direct-to-broker operations. Most bridging lenders have been doing this for years.

Although packagers undoubtedly add value to brokers who deal with specialist loans only infrequently and do not know the products, this does come at a cost. For a lender to be on the panel of a packager, it has to pay, which usually starts at 2 per cent of the gross loan. The lender then needs to recoup that from somewhere and this can take the form of higher interest rates.

The broker too will often receive a lower procuration fee than if they had gone direct.

There is, of course, enough room in the market for everyone; every business fulfils a different need. The amount of help a broker requires will depend on how familiar they are with that product area. Some want or need the help of a third party to take the strain and do the work for them, while others prefer to be in control of the client relationship and put a case together themselves.

The ultimate question is: what is best for the customer? If you can get the best service for your client and best proc fee for your business, and if you know the product area well, why not just go direct?

Jonathan Sealey is chief executive of Hope Capital