Do you think there is a perception that commercial finance is difficult or a lot of work for brokers that makes them warier of considering it? If so, what can be done to encourage brokers to the space?
There is a perception that commercial loans are complicated and that they are a lot of work. As a result, this has led to some intermediaries overlooking commercial finance as a suitable recommendation, therefore preventing them from offering a wide range of products and criteria to their clients.
I think there are reasons for this. If you are a general intermediary that deals mainly in residential or buy-to-let mortgages, it can be very difficult to suddenly turn your hand to a commercial case, as they are not familiar with the process, the lenders or the people to contact. In fact, it would be no different to me trying to fit in the odd residential or second charge case into my workload. Therefore, for intermediaries that only have the occasional commercial case, the specialist distributor route is a good option, and in order to deal in commercial property, you have to make it your specialism.
What advice would you give to a broker looking to move into this area?
I think that it is difficult to move into this specialist area without having support, so in reality this probably means moving to an established brokerage and learning on the job. For self-employed intermediaries I think a transition is difficult and they may need to experience some short-term pain in terms of lost income while they build up a commercial pipeline.
Bridging growth bounced back in Q3, but times taken to complete loans are slightly longer. Why do you think this is?
According to recent statistics, it is taking three days longer to turn around a bridging loan compared to Q2 of this year. However, hidden within the numbers are all kinds of different transactions such as refurbishment loans that typically take longer and barriers including down valuations that must also be considered. However, although I am not directly involved with bridging on a daily basis, if the commercial market is a guide, it will ultimately be the legal process that is the main cause of delays.
How has the weakening of the pound affected commercial finance, and do you think this will affect the sector long term?
I think the effects of the fall in Sterling are still in a state of flux and there seems to be a split in opinion as to whether or not we have hit the floor in value. In simplistic terms, the lower currency makes UK property cheaper for overseas investors and, in the low yield environment, I think that investors will be looking at UK property as a safe haven to park funds. In turn, this should help underpin property prices at the top end to a certain extent, but the parameters are still moving.
If you could read one headline about financial services, what would it be and why?
‘The FCA allows authorised brokers to receive introductions from non-authorised parties’. I think this has been the most contentious of the rules that have come in since the FCA oversight of credit broking and has caused issues for most of the brokers that I have spoken to.
