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Interest charging sparks debate and investigation

By Sarah Davidson

The Association of Short Term Lenders is to investi- gate lenders charging bor- rowers interest on rolled up interest they don’t need up front. Outgoing ASTL chief executive Adrian Bloom- field told industry leaders he would raise the issue with the executive committee. He said: “It may well be

that this is a serious issue... and we may need to write a position paper where the members think we all need a code of behaviour, or the members may think this is not an issue to contend with.” His comments were pro-

voked by research done by Precise Mortgages showing some bridging lenders are charging clients thousands

of pounds in interest on the interest they borrow to ser- vice the loan over the whole term.

Alan Cleary, managing di-

rector of Precise, said: “The inconsistent nature of how lenders calculate interest in this space is just one example of massive inconsistencies in this market - virtually ev- ery quotation put out in the bridging market is inconsis- tent and incorrect.” Cleary said while it may

be legal this practice isn’t transparent. “This is math- ematics surely. We have one case where a customer is be- ing charged £28,400 more interest with another lender compared to our quote and we’re both quoting the same rate. That’s wrong. It’s not transparent; clearly it’s not good for the customer.”

Laurence Goodman, chief

executive of Bridgebank Capital, said he thought trust was an issue for borrowers. And he added: “Some

lenders are still guilty of not fully identifying the costs of their lending. That’s some- thing that the ASTL should be looking for as a standard for members so what lenders are offering is transparent.” Meanwhile Rob Jupp, managing director of Bright- star Financial, said Cleary’s point wasn’t “just another throwaway statement”. Jupp said: “What he’s say- ing is proven, this is of fun- damental importance to the future of short-term financ- ing. Let’s not overstep this is- sue. If Precise is proven right there’s going to be a lot of soul searching for all of us but particularly the lenders.”

Short-term lending hit £911m in 2011 By Sarah Davidson

Gross lending in the short- term sector hit £911m in 2011 driven largely by residential buy-to-let

investor demand,

claims West One Loans. The volume of loans ad-

vanced was 62% higher last year than in 2010 thanks to an increase in the number of property investors using bridg- ing loans to finance their proj- ects. Net

lending increased 67% in the same period.

LOAN SIZE The average loan size was 28% higher in 2011 than

2010. But the average size of a loan fell from £322,000 in August to £266,000 in De- cember, reflecting the tradi- tional winter slow-down. Duncan Kreeger, chair-

man of West One Loans, said: “Buy-to-let is the horse pulling the cart and it’s driving the bridging industry forward at a rate of knots.” In 2011 some 84% of all

loans by volume were to resi- dential property investors, compared to just 70% in 2009 and 77% in 2010. The average interest rate on a bridging loan declined year- on-year to 1.41% by the end

News in Brief

• The Manchester Mortgage Business Expo will take place at Lancashire Cricket Club’s The Point on the 23rd May 2012.

• Brightstar Financial and Shawbrook Bank have completed a £1.78m loan in just 19 days.

of 2011, down from 1.64% a year ago. Meanwhile the Association

of Short Term Lenders is to publish quarterly data aggre- gated from its 26 members from the end of March. Out- going ASTL chief executive Adrian Bloomfield confirmed the bridging lender trade body is in the process of “tinkering with the format” but added: “It is my expectation that we will have data collection from the period pertaining to 31st March 2012. The members of the ASTL have already agreed going forward those figures will be released.”

• Bridging experts have welcomed the launch of which markets itself as a sourcing system for short-term loans, but say it must be treated with caution. • Tiuta has announced a significant extension of its large loan funding line. • Precise Mortgages has added second charge lending products to its bridging range. • Precise Mortgages has launched joint legal representation for clients taking bridging loans. • West One Loans has appointed three new members of staff at its Hertfordshire headquarters to improve service. • Brokers expect to be writing 27% more bridging loans in twelve months time, according to research from West One Loans. • Precise Mortgages has teamed up with Aldermore Commercial Mortgages to offer a combined standard bridge product with a remortgage exit on buy-to-let deals.

• The ASTL cut £1,000 off its membership fees bringing them down to £4,000 a year.


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