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and doom laden stories the fact is that a good term lenders thrive on tight deadlines and auction activity where investors take advantage of
number of short term lenders have weathered doing things quickly. The provision of the speed of short term lending to complete
the storm and are still lending, with LTVs that additional information does not and should within the tight auction deadlines before
shadow those available in the refinance market. not mean additional delay in processing loan arranging refinance. Typically, these loans are for
That in itself is an achievement. applications. A side benefit of this more 6 months which is the minimum amount of time
Secondly, the disappearance of much of the thorough approach is that brokers and that most mainstream lenders seem to require
competition in the market has reduced the borrowers are better prepared for applications ownership of a property before allowing a
pressure on short term lenders to do loans that to mainstream lenders when repaying a short refinance.
are marginal. Put another way, short term term loan by way of refinance. Interestingly, what we have also seen is a
lenders can be more selective about the lending Brokers are much more realistic about the number of applications from individuals and
they do and this should not be regarded by prospects of their more marginal clients companies which have been presented with
brokers as a negative development. obtaining finance. Much of the tension unexpected VAT or tax demands and who need
On the contrary, completing better, safer between lenders and brokers has therefore to settle with the authorities before a credit
loans leads to better performing loan books, eased and are working closer than ever before impairing judgment is entered against them.
increasing the confidence of short term lenders to get short term loans completed. Confidence in the future of the short term
in their own ability to lend safely, which should sector is also highlighted by the formation in
ultimately result in the wider and continuing Optimistic 2008 and growth of the Association of Short
availability of short term loans to the public. Combined with this new more cautious Term Lenders (ASTL) to which most of the key
Another result of the changed environment approach and mutual understanding is the fact players belong. The ASTL not only sets out
is that short term lenders are now able to ask that since late spring 2009, many more people are minimum standards of conduct, but provides the
for additional information on borrowers and optimistic about the prospects of the residential short term sector with a voice to make formal
that brokers are much more understanding of property market. This has resulted in increased representations to and be heard by institutions
these requests. At Cheval we ask that all activity in the short term sector and completions such as the FSA and CML.
borrowers complete a combined Income & are steadily on the rise. There will always be demand for short term
Expenditure and Assets & Liabilities Form as Activity is manifesting itself in a number of lending whatever the state of the economy. The
well as provide their last 3 months’ original areas. The “classic bridge” whereby a customer crucial aspect for bridging lenders is to know
bank statements. Brokers appreciate that this is needs to complete on a purchase – usually a new their customers, ensure that the reason for the
part of the new mantra of responsible lending home – before having completed on the sale of loan makes sense and that the take out is genuine
and Know Your Customer (KYC). their existing property remains in demand. and plausible. Everyone ultimately benefits from
Further, as I mentioned previously, short Likewise, the industry has seen an increase in better, safer lending.
www.mortgageintroducer.com November 2009 Mortgage Introducer
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