News Review: Short Term Finance
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Death, taxes and end of term dates
by Paul Brett, business development director, borro
If the two certainties in life are death and taxes then the wider lending industry, in doing its best to ensure that mortgages and loans have a very defi ned end date, is trying to create a third one for the future.
Clearly, all loans have a proposed end date but the fact that
in the past few if any lenders insisted on sight of a repayment vehicle when the borrower opted for interest only, means that now plenty of borrowers are going to reach that end date and fi nd that they actually have no way of repaying the capital they still owe. For short-term lenders the issue is different. As the term
is traditionally no more than six months to a year on average, obviously repayment vehicles are irrelevant but ensuring that the client has a clear exit strategy is as important as assessing the quality of the property or asset as security. The ability to repay the loan is as much to do with what comes
after the bridge as it has with assessing income and expenditure at the start. To counter claims that short-term fi nance is the last refuge of the desperate, it is important that intermediary and lender are sure that the client has a convincing case and that the loan has a distinct beginning and end. Naturally the secured property can be sold in the event of
non-payment, but that hardly sends out the right message to the market generally and certainly not to the regulator. Again this comes back to trying to balance the need to reinforce the message of speed of service which is one of the bridgers’ key USPs, with the cost in man hours of having to repossess as well as the continuing perception of being lenders of last resort.
Authorisation crystal ball may be right
The short-term market might be on a high at the moment but there is a potential issue which could seriously damage the new dynamism which we can all see. This particular cloud on the horizon emanates from Europe, the home of bureaucrats and red tape. The European desire to harmonise the different fi nancial
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY.
The information within this advert is for professional intermediaries only. If you do not have the relevant professional experience, you should not rely on this information. It is not a consumer advertisement and should not be displayed or used as such. Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ.
20 MORTGAGE INTRODUCER JULY 2011
services cultures, particularly in the areas of customer interface and compliance, will provide our law makers and regulator with plenty of work as they try to integrate their rule book with the edicts from our European masters. If history teaches us anything it is that in general the UK has
an enviable track record of applying the full force of European rules, while our continental cousins tend to adopt a more pick
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