"We are seeing lenders increasingly competing on rates, offering initial lower figures, which are later loaded with various fees, significantly raising the costs for the borrower."
We spoke to Nick Russell, sales director at TAB, about how the firm plans to become a top five bridging lender and why brokers shouldn't try to ﬁt a square peg in a round hole.
FR: TAB launched to market in April 2019 – tell us a bit about your proposition and what you can offer to brokers and their clients?
TAB is a lender providing a broad range of short-term loans for first and second charges, as well as for commercial and residential property. We work with a range of brokers across the UK, from small and independent firms to large volume, packaging firms and are keen to develop their broker network further.
We have an extremely experienced team of bridging professionals, with complementary skill sets, including unparalleled in-house legal advice. Between them, there aren’t many situations they haven’t dealt with. We also have very ﬂexible funding, which allows us to be nimble and make sensible lending decisions, based on the borrower and underlying real estate.
FR: What are TAB’s main aims or focuses in 2020? Do you have any exciting news or plans you can tell us about?
We want to firmly establish ourselves in the market and are looking to strengthen our broker network across England, Wales and Scotland.
We are also developing a range of new added-value products, across various asset classes, which we will launching later this year and into 2021. This year will also see the expansion of our sales, admin, collections and legal teams as this is crucial to the development and expansion of our loan book. However, our overriding priority is to focus on our core proposition – trust and transparency - and strive to enhance our service.
Before joining TAB, the team has a combined track record of £2bn of completions across 2000 loans. The lender is now working towards becoming a top five bridging firm over the next 2-3 years.
FR: What makes a great bridging lender in 2020?
There are several factors that make a great ‘gold star’ bridging lender. Transparency and communication is key. Lenders should be clearly explaining the fees and charges within the quotes to ensure that borrower understands every stage of the process.
In addition, lenders should have a willingness to deliver on promises and not move the goal posts down the line, making last minute changes that cause delays. At the same time, lenders should provide quick and efficient loan processing, without cutting corners. The underwriting team should be very thorough and rigorous and have highly skilled and knowledgeable experts. Great lenders will communicate with a broker at every stage of the deal and handle any difficulties with speed and competency.
FR: What trends do you expect to see within the specialist lending market in 2020?
The bridging market is highly competitive and saturated. New entrants are entering the market, thanks to advances in ﬁntech. Recent figures from the Association of Short-Term Lenders (ASTL) show that bridging loan books grew to a record £4.62bn at the end of the second quarter of this year, representing growth of 11.7% compared to Q1 2019 and an increase of 14.4% on the same quarter last year.
Bridging is seen as the last area of unregulated lending and it is relatively quick and easy to set up to lend. However, some of these new lenders lack experience and are unable to identify future problems and may not have the personal knowledge and experience, to handle issues in an effective and sensible way.
Brokers need to work with lenders that are in it for the long run and have the right experience in the bridging market, working with their clients through good times and the bad. With regard to brokers placing clients, my best advice is don’t try and ﬁt a square peg in a round hole.
FR: What are the biggest issues facing advisers in the current economic environment and what should they be aware of when dealing with clients?
We are seeing lenders increasingly competing on rates, offering initial lower figures, which are later loaded with various fees, significantly raising the costs for the borrower. Often, borrowers are notified of fee changes at the last minute.
Increasingly borrowers are shocked at the extension rates they are charged at the end of the bridging term, which can be extortionately high. The true costs and fees of a bridge loan are not always understood by clients or brokers and often the plan to exit and repay the loan is unclear. It is important that brokers work with clients to put together tailored solutions that encompass a bridging solution, as well as longer-term finance strategies.
FR: If you could see one headline about financial services in 2020, what would it be?
'Transaction volumes are steadily increasing breathing, confidence in to the UK real estate market'.