BCFI: News Review
Short term flurry bodes well for future of bridging
by Guy Garrard, head of business development, Tiuta
the early part of any year is usually a little sluggish across most sectors in the industry. But this year has seen a spate of activity in the short-term lending and specialist distri- bution arena. Brightstar
Financial
launched in the early weeks of January, headed by in- dustry stalwart rob Jupp and backed by tiuta, mort- gage advice Bureau and coreco. the specialist lending arena has become
more complex and support in this key area of the market is essential for inter- mediaries. at the same time, lack of
activity has forced many dis- tributors to contract, con- solidate or leave the market. this launch should be seen as a positive as specialist dis- tributors remain integral for the vast majority of specialist lenders. Possibly the most exciting
and encouraging announce- ment of the year thus far has come from a competitor. We’ve said many times be- fore that the more regulated lenders operating within the short-term and special- ist lending market the better
as this will work to continue raising standards. it was great to see mast-
haven become regulated after a “lengthy process and hours of hard work and persever- ance”. Becoming regulated is an arduous journey but justi- fiably so. dealing with a regulated
specialist lender adds an ex- tra level of security for in- termediaries and serves to emphasise the question they should be asking themselves. Would you rather deal with an unregulated or a regulated lender? With few regulated short-
term lenders this may limit broker options but it is a rel- evant question as the regula-
tory grip tightens. Let’s hope that more short-term lenders follow this lead. in other news cheval
Bridging Finance has been acquired by a new parent company, cheval Holdings, owned by a consortium of investors and cheval’s man- agement. the lender will also receive a capital injection from the new owners and will renew the existing primary funding facility with clydes- dale Bank. of course increased fund-
ing means increased innova- tion and competition. So in terms of the short-term fi- nance market it seems there is plenty of good news all round.
Finding the appropriate solution for secured loans By Tony Salentio and Gary Bailey
mortgage intermediaries have normally been reluctant to get involved with secured loan or second charge appli- cations. and while it could be said that this is still the case in today’s market, things are beginning to change. a remortgage has long
been viewed as providing a relatively cheap way of raising finance – after all, the rates obtainable are far lower than those on unsecured finance. there are many occasions
when a second charge or secured loan provides a more appropriate funding solution to a remortgage. the most obvious example is where a borrower has a large redemp- tion penalty on their existing mortgage. early redemption penalties take various forms
and, of course, you’ll find different terms and condi- tions depending on which lender you go to. However, some fixed rate mortgages carry penalties of up to 7% of the outstanding mortgage balance if redeemed within the fixed rate period, and some still carry an overhang penalty after the tie in penalty comes to an end. When considering the
options for borrowers, the overall cost of the loan is an important consideration. the aPr is a tool that can be used when comparing different products as it will take into account associ- ated fees and charges, which might include valuation and administration fees, lender arrangement fees, legal fees, and in many cases, broker fees, discharge fees, title
48 mortgage introducer MARCH 2011
insurance and telegraphic transfer fees. these can often amount to thousands of pounds and should not be ignored. Secured loans, on the other hand, will carry very few of these fees outlined and will usually only be subject to the lender’s arrangement fee and a broker fee. many borrowers are ben-
efiting from low rate tracker products which are not so readily available in today’s market. a secured loan means the borrower can keep these low rates and pay the higher rates on just the additional secured loan borrowing. For borrowers with a
blemished credit record, the chances are that raising additional finance through a remortgage would mean paying a higher interest rate on the entire amount of their
borrowings, if their original mortgage was taken out before running into credit problems, By using a secured loan, they can still benefit from the prime rate of inter- est on their mortgage whilst only being charged a higher non-conforming rate on the new secured loan. Speed is an important fac-
tor that is often overlooked when assessing the remort- gage versus secured loan comparison. Provided they are aware
of the facts, then if speed is the primary issue, a secured loan will win every time over remortgage or further advance.
T ony Salentio is CEO of
Complete Mortgage and Loan Services and Gary Bailey is director at Blemain Group
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