Are Meerkats and Bridging Loans a Good Mix?

Why Shopping Around for a Better Deal Could Be Detrimental to Your Borrower’s Application

At this time of year, I am inundated with emails reminding me to renew my car insurance. For most, it's an annual ritual that has become part and parcel of our lives. We are living in an era where finding the best deal is just a matter of a few clicks and it's tempting to apply the same principles when it comes to specialist lending such as bridging loans. However, it's not always as straightforward as it seems.

At Ortus, we have noticed a trend where several brokers are introducing the same deal, something which is frustrating for all parties.?This could be due to a disconnect between borrowers' expectations of pricing and what lenders can offer now that BBR sits at 4.25%.

The temptation to shop around

It must be tempting for borrowers to apply the car insurance rationale and shop around.?However, things are more complicated when it comes to specialist lending.

In most cases we review, the broker has run through the borrower’s requirements professionally and thoroughly.?They have usually met the borrower – either in person or virtually – or it’s a client they have known for a long time. Time has been spent understanding the client’s circumstances and time-consuming market research has been completed.?The broker has then presented options to the client and made a recommendation.

In other words, it isn’t a 5-minute job!

However, if the pricing comes back above expectations, it’s not unreasonable for a client to seek a second or even third option.

However, lenders are a cynical lot, and if a deal is going around the market, it makes us think there's an issue that one of our competitors has picked up. We need to be careful not to jump to conclusions, but it's essential that borrowers understand the implications of shopping around.

While comparing ‘meerkats’ can be sensible when it comes to car insurance, care needs to be taken when it comes to searching the market for bridging finance.

Accepting the new normal

We are currently in a period of adjustment, something I am calling the "new normal." Market participants are coming to terms with the impact of base rate rises and how this affects lending appetite and the cost of capital.

More than ever both lenders and brokers need to educate borrowers as to what is happening in the wider economy and how this affects lending appetite and borrowing costs.

Trusting the process

Many economists are saying we are close to the top of the cycle of base rate hikes, and some are even forecasting cuts before the year is out.?Despite the challenges, the UK's business sector remains adaptable and is ably assisted by innovative specialist lenders who continue to provide liquidity. As we navigate through this period of adjustment, we need to be patient and trust in the process. History teaches us that these periods pass, and the "new normal" becomes the status quo.

The Bottom Line

In summary, borrowers seeking specialist lending should prioritise working with a professional broker who can provide per options that meet their specific needs.?Shopping around for better deals could potentially harm their application, and borrowers should understand the implications of doing so.?Furthermore, both lenders and brokers should educate borrowers on what's happening in the wider economy and how this impacts their ability to access finance. Despite the challenges, resourceful specialist lenders are still supplying the UK’s flexible business sector with much needed liquidity, and we should trust the process as we navigate through this period of adjustment.