Challenging the challenger banks
Matthew Tooth is head of distribution at LendInvest
The bridging market has enjoyed an excellent couple of years, and as a result has seen a succession of new lenders entering the market. That competition has forced all of us to look carefully at how we price bridging loans.
Over the last few months we have spent a lot of time on adjusting the LendInvest product range to best meet the needs and expectations of mortgage intermediaries.
Back in June we moved to split out our product range into distinct tiers, in an effort to offer brokers and their clients a more granular proposition. A one-size-fits-all approach simply doesn’t work with bridging. Cases come in different shapes and sizes, so you need a more diverse product range to address that.
So we opened up three tiers of pricing. Tier 1 covers the simplest, most vanilla residential bridging cases. It is available up to 75% loan-to-value which is unusual in the current market. It is the cheapest product too. Because those cases tend to be more straightforward, it is easier – and cheaper – for us to secure the necessary funding for those loans, which then feeds into the interest rate charged.
Tier 2 is built for the more complex bridging cases, such as HMOs or heavy refurbishment cases involving structural or extension work. Because it is more flexible, it is a little more expensive than Tier 1. Finally there is a commercial bridging tier which covers any commercial cases brokers bring to us.
We have now adjusted the product range again, to make the Tier 1 pricing even more competitive.
The rates we charge on Tier 1 bridging loans has been cut significantly, by as much as 11 basis points per month. As a result, rates begin at 0.64% for a 50% LTV deal, and go up to 0.94% for the 75% LTV bridging loan.
By cutting the rates so significantly we are moving in line with the very best deals from the challenger banks.
We are also fiercely ambitious about our future prospects. We have seen terrific growth over the last three years, but we aren’t interested in resting on our laurels. We want to be the first choice for intermediaries up and down the country when they want short-term property finance.
To do that, we need to put up a challenge to the challenger banks, not just in terms of service but price too.
As we have built up our record as a successful business, we have been in a position to attract a deeper pool of capital than ever before. One of our defining characteristics is our diverse range of funding sources, encompassing direct banking lines, the two managed funds we run and of course our online investment platform, which allows retail investors to put their money into property loans.
That capital base gives us the room to move on the rates we charge on the Tier 1 range.
It’s worth remembering that in the bridging market, intermediaries look for more than just the lowest rate for their clients. We surveyed brokers earlier this year to establish what they felt were the most important factors when deciding which lender to use. They were unanimous in picking fast turnaround times and support from business development managers, ahead of the interest rate charged. Our business is underpinned by personal relationships and the ability to make decisions based on commercial understanding and acceptance of risk and all brokers will appreciate that; as in bridging cases there is often a non-standard feature that needs a pragmatic solution to get the case over the line.
With short-term lending, time is of the essence – brokers want to deal with reliable lenders that they know can deliver the funds swiftly, and who will offer round-the-clock support. That has become even more important since Brexit, with some lenders looking to pull back on their activity.
We enjoy an excellent reputation for the speed and efficiency with which we deliver the required funding, so combining that with an even more competitive pricing structure is a proposition that we believe is hard to beat.