News Review


ASTL fails to investigate interest charging until new chief appointed


By Sarah Davidson The


Association of Short


Term Lenders has dodged industry calls for a standard way of disclosing charges to clients. At the start of March this


year outgoing ASTL chief executive


Adrian Bloom-


field told industry leaders he would investigate practices in the market and raise the issue with the executive commit- tee. But a spokeswoman for the ASTL has revealed that the issue of fair charging had been dropped until a replace- ment was found for Bloom- field.


APR STANDARD Meanwhile there have been suggestions that all lenders should publish an annual percentage rate which would allow borrowers to compare the cost of all deals across the market


- regardless of how


they charge fees and interest. APR was introduced in the mainstream mortgage market in the 1990s to provide a stan- dard allowing borrowers to compare costs between lend- ers. It is calculated using a standard formula prescribed by the UK’s Consumer Cred-


it Act Commencement No. 6 (1980). If the term is less than a year the APR is calculated on an annualised basis over 12 months.


“There have been suggestions that all lenders should publish an annual percentage rate which would allow borrowers to compare the cost of all deals across the market - regardless of how they charge fees and interest”


Martin Reynolds, chief ex-


ecutive of SimplyBiz Mort- gages, said the current de- bates circulating within the bridging industry felt


like


Groundhog Day. He said: “These


are


bates we were having in the mainstream market in the late 1990s. Standardising the basic aspects of the bridging process will enable true com- parison but should not stifle innovation.” Steven McColl, investment


partner at bridging specialist Soho Corporate, said several short-term lenders already published APRs including Lancashire Mortgage Cor- poration, Affirmative


Fi-


Steven McColl 4


nance and Capital Bridging. “I would be supportive of APR publishing as it would help demystify our sector. Currently there is often a lot of explaining to do to clients in terms of rate methodol- ogy,” he added.


BRIDGING INTRODUCER MAY 2012 the same de-


LENDER BACKLASH But


several bridging lend-


ers shrugged off the idea as irrelevant to the short-term market. Bob Sturges, head of communications at Omni Capital, said: “As it develops and matures the sector is adopting many of the stan- dards apparent in the main- stream market. But direct cost-of-borrowing compari- son in the form of APRs is not, I would argue, a pressing or even relevant issue. Were APRs to be adopted in bridg- ing I doubt they would have a material effect on custom- ers’ buying choices. Nor do I think they are a usefully rep- resentative measure of what a short-term facility can pro- vide.” Yasin Patel, director at


Precise Mortgages has


also started to publish APRs on both regulated and un- regulated bridging deals and managing director Alan Cleary said: “APRs were brought into the main- stream market to stop these sorts of issues back in the 90s. It’s a standard calcula- tion produced for every deal and would be truly trans- parent and good for cus- tomers on both regulated and unregulated transactions.” Chris Borwick, associate


at SPF Short Term Finance, said some standard method of


disclosing charges would


be helpful. “I’ve never been a fan of APR but if there were a standard way of calculating the interest this would be a step forward,” he said.


Steven Nicholas


Mayfair Bridging, agreed saying price was less relevant than speed of transaction in bridging. And he added: “I believe most bridging lenders I know are clear and trans- parent in which they charge. We don’t have small print in our contracts everything is very clear.” Steven Nicholas, chief ex-


ecutive of Tiuta, said pric- ing for risk is often applied in bridging making the publica- tion of “comparable rates” both “difficult and potentially misleading”. But he said: “It would not


be unreasonable to have APR as a basic standard but the potential for constant changes might make it unworkable.” And Gavin Diamond, fi- director at


nance


Cheval


Bridging Finance, added: “Depending on whether the borrower is seeking a three, six or 12 month loan, the APR could be very different. “It is for this reason that


it’s not relevant for bridging lenders to advertise APRs as it depends on the length and nature of the deal that the


borrower is seeking funding for.” www.mortgageintroducer.com


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