The bridging industry is full of smoke and mirrors and in need of a lesson in transparency and clarity, according to one bridging lender.
Brian Rubins, director of Alternative Bridging Corporation, has claimed the industry lacks openness, making it vulnerable to abuse.
He believes using terms such as “Loans up to 90% LTV”, “interest from 0.5% per month” and “completions in 24 hours” are misleading for borrowers, telling them what they want to see rather than what the actually get and what is in the small print.
He said: “Overall our industry is growing and maturing and so must each of the lenders and brokers who operate in it.
“We all want to attract as many new enquiries as we can and using “from” and “up to” may help to make the phone ring or the computer ping but, in fact, building lasting relationships is far better achieved when founded on truth and facts.”
Using phrases like “up to” and “from” allows lenders to advertise the lowest rates or highest loan amounts available which can seem very attractive to customers. What it doesn’t show however, is that those rates may not be available to many customers unless they fulfil very narrow criteria.
Borrowers can apply for one product and end up with another completely different product at the end of the process which costs them more than they originally thought.
Mr Rubins adds: “For brokers who can be relied upon it is far better for lenders to give them access to detailed underwriting criteria so that they are fully aware of terms, preferences and red lines.
“It saves the broker time and rather than relying on “from” and “up to” and being let down, he can say to his client on day one, these are the terms and you will get them, maybe a little better but definitely no worse.”
The bridging market is more than a stop-gap these days and £3.3 billion was lent in 2016, according to the Association of Mortgage Lenders. Demand for bridging loans is being fuelled by rising property prices, developer confidence and cheap finance. They currently make up around 2% of the UK mortgage market.