picking up much of the slack from limited social housing and tight mortgage finance is also limiting people’s ability to buy houses. “There’s a sustainable demand
for short-term loans to help get property to a letting standard.” Cleary is also aware that while competition in this sector from lenders might look hot, there’s a lot of hot air.
“Funding works differently in the short-term sector, “he explains. “You can’t rely on warehousing or securitisation because the loans only last six months. You need liquid funding available. There are a lot of lenders in the bridging market that make a lot of noise but without significant cash behind them, it’s just noise.
“The thing about Precise is that
we have money to lend,” says Cleary. “We constantly look at adjacent markets for opportunities to lend to get the margin we want at the risk we are prepared to take. “Short-term lending allows us to leverage the skill base we already have. Credit risk, treasury, finance, servicing are fairly generic to mortgage lending so this was a market we could enter easily and quickly. We also have a natural fit with brokers.”
Precise has hired two new faces
however to make sure the business hits home with intermediaries and customers from the word go. roger Morris, formerly with Affirmative, joined Precise as head of sales in April while richard Lawton came from Manchester-based bridging firm Pricapita to head up Precise’s underwriting department for the bridging arm.
diStributioN
Precise is open to dealing with any broker though currently distributes through brokers already registered with the lender. “We’re a member of the National Association of Commercial
“The bridging market is in the midst of change: a mix of increasing competition from lenders and rising demand from developers hamstrung by lack of access to mainstream finance”
Finance Brokers and we’re now embarking on getting more of the unregulated brokers that only deal with unregulated business onto our panel,” Cleary explains. “Anyone can register with us as long as they have a Consumer Credit Licence.”
PlaNS for the future The bridging market is in the midst of change. A mix of increasing competition from lenders, rising demand from developers hamstrung by lack of access to mainstream finance and a tightening regulatory environment for banks is pushing it further towards professionalism. But while bridging is unregulated at the moment, it looks increasingly likely that regulation coming out of europe will see tighter controls imposed by the FSA on bridging loans. Indeed, the Association of Mortgage Intermediaries has confirmed that it expects bridging loans over 12 months to be caught in the summer Mortgage Market review.
While some residential bridging is already caught under FSA guidelines, this move looks likely to cause a shift in the way lenders do business in the future – either by forcing them to seek full FSA licences or by restricting their activity to commercial lending. Precise, although fully regulated
as a mortgage lender, has chosen not to go down the regulated bridging path for the time being. “We are still wrestling with how it is responsible to lend to residential customers at the rates that are typical in this market,” says Cleary. “They’re not affordable long term and the differential between short
and long-term rates is significant. “That’s not to say we’ll never enter into a regulated market. We are already getting applications we decline because they’re FSA regulated. We’re keeping an eye on that market and if we can get comfortable with that type of lending we may move into it, but right now it’s not on the cards.” Ultimately, Precise has got into the short-term game because it offers good risk, good return and quality business all at a healthy margin. “The whole market is short on funding,” says Cleary. “Landlords are constrained because buy-to- let lenders and banks that did development finance in the past are cherry-picking. The state-owned banks can’t seem to make their minds up. That’s created a space where funding is important. “When house prices dip and funding is scarce that represents a serious opportunity for an investor. giving them the ability to access that opportunity when Joe Public can’t is driving demand for what we’re doing now. It’s an opportunity for us as well as for them.” He is optimistic but practical about the scale of that opportunity. “I don’t think it’s boom time
by any means,” he says. “I just think given our resources and our funding, we can make a significant impact, probably to the detriment of the competition.” Bridging, brokers say, is all about trust and relationships and Precise certainly seems to have tapped into that. Whether its practical and personal approach succeeds isn’t yet precisely obvious, but it’s a good place to start.
BrIDgINg INTrODUCer jluy 2011 31
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