A one-size-fits-all mentality simply doesn’t cut it, particularly in an age when regional property differences are becoming starker, one specialist finance expert has claimed.
The comment comes after JLM Mortgage Services urged lenders to consider sector-specific product ranges to support advisers in various parts of the UK.
The mortgage network claimed that a homogenised product range was no longer suitable for mortgage borrowers due to the significant differences which can exist between regions.
Are homogenised product ranges unsuitable for bridging?
D’mitri Zaprzala, head of sales at Octopus Property, felt that homogenised product ranges were no longer suitable and said it had never taken that approach.
“As the dynamics of the UK property market continue to change, so should the approach taken by bridging lenders. “We have always looked at deals on a bespoke, case-by-case basis, but with the added certainty of a range of interest rates. “I think that this is crucial so as to give brokers and clients confidence that the price they will pay for their loan is correct and transparent. “A 100% homogenised product range which takes nothing else into consideration is unlikely to be suitable, nor realistic.”
Jonathan Sealey, CEO at Hope Capital, felt that for specialist bridging lenders there was no such thing as a set product range.
“A good lender should look behind the deal to establish what the borrower is trying to achieve and the likelihood of that happening. “This should, by its very nature, take into account the type of finance needed, the geographic area and the likelihood of a loan being repaid given these scenarios.”
Paul Riddell, head of marketing and communications at Lendy, agreed, adding: “I’m not sure any good bridging lender was ever ‘homogenised’ – the nature of the sector means there is a lot of bespoke lending going on.
“A lender that tries to fit all borrowers into one box is going to struggle to get deals over the line. “Borrowers do come in all shapes and sizes in bridging, and the lenders with the most expertise are able to find ways to get funding in place for a broader range of them.”
Meanwhile, Colin Sanders, CEO at Tuscan Capital, added: “Homogenised products are fine for lenders who focus on specific geographical areas, such as prime central London, or discrete sectors, such as student accommodation/HMOs.
“But for providers who profess to offer a truly nationwide service, it makes sound commercial sense to promote a flexible lending range that takes into account regional differences and demand. “A one-size-fits-all mentality simply doesn’t cut it, particularly in an age when regional property differences are becoming starker and more pronounced than ever before.”
The differences between regions
Benson Hersch, CEO at the Association of Short Term Lenders, explained that in most areas outside of the South East, prices were lower.
“Some lenders do not lend in Scotland and/or Northern Ireland, while others may look to reduce LTVs. “Increasingly, those lenders who are actively engaged in these areas will limit the number of loans they are prepared to offer. “It’s therefore very important to have the right valuers, who have local knowledge.”
George Petrou, senior underwriter at Pivot, pointed out that London could be split into its own micro economy and then further split into two sub-sections: the outer suburbs and high-end central London.
“Due to uncertainty in the current market – and the new stamp duty changes – the high-end central London property market has suffered in terms of price appreciation values. “Many lenders are now beginning to limit the LTVs for high-end central London properties, due to poor yields, the reduction in property values and further uncertainty of how the high-end property market will perform.”
George said another difference between regions was how reliant they were on demand from international foreign buyers.
“The London property market – and in particular the high-end central London market – has enjoyed strong property price appreciation due to the very healthy overseas demand from foreign buyers, in particular from Russia/China/Middle East. “Due to either uncertainty in the foreign buyer’s domestic markets, or uncertainty in the UK market due to Brexit, there has been a drastic drop in demand from overseas.”
Localised products
“As the market becomes more saturated with new lenders, we are seeing some lenders offering more tailored offerings – often marketing-led initiatives,” said Keith Aldridge, managing director at Amicus Property Finance. “While we certainly will consider how we can provide more information and product support to brokers and borrowers in future, we prefer to work on each project to tailor a lending solution to the specific and often complex needs of the borrower.”
Stephen Burns at Adapt Finance felt that localised products were already in existence, but that brokers failed to find them as lenders failed to promote them.
“London lenders often describe suburban loans as ‘rural’, demonstrating, in essence, [that] they don’t have a comprehensive knowledge of certain areas so (rightly) don’t promote products aimed in those areas.”
Jonathan felt that only the very largest lenders were going to have multiple product ranges. “For many smaller lenders able to make their own decisions, the published [criterion] is the starting point, which may be stretched and adapted for the right borrower and the right case. “This should already meet individual needs and requirements.”
Looking at the positives, Benson said: “…Where lenders target specific sectors, this encourages intermediaries to approach them, rather than use a scattergun approach. “This benefits all parties.”
George added: “The benefits to lenders/borrowers will be that both will have specific, specialist knowledge of the region that they would prefer to operate in.
“For example, a lender that is London/South East-centric, can offer clients looking to invest in this region better LTVs, rates etc, as they are confident in the specific market they operate in. “Many lenders may not wish to lend in regions such as Scotland/Northern Ireland, due to the different lending laws, or potential severe downturns in the property sector during economic downturns. “Offering sector-specific product ranges means that the lender can offer clients bespoke product ranges that will suit their specific lending requirements and needs.”
However, D’mitri concluded: “I do not think that regionally-specific products are the answer.
“Instead, lenders should learn about the regions they are lending in and fully understand the opportunities and variables within them.”
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