March 2018
By Eddie Boakye, head of underwriting, Funding 365
Over a sustained period, the industry has witnessed a huge surge in the number of new and established bridging lenders reducing interest rates to an all-time low, particularly for selected broker partners, with some rates now lower than 0.5% per month. Going back only a couple of years, such rates would simply not have been obtainable. Ultimately, the demand for short-term secured loans to bridge the gap when buying property has increased rapidly.
In mid-2017, financial experts and industry bodies predicted that bridging rates had hit rock bottom. Interestingly, achievable rates have reduced even further as new lenders have entered the market and existing players work to gain a greater market share. Although it may sound appealing to the typical rate-sensitive borrower, we are seeing a selected number of lenders falling short in other areas of their offering. In some cases, brokers have reported a demise in service, flexibility and speed, which may have a longer-term effect on both lender reputation and the likelihood of borrowers being attracted solely by ‘great rates’.
Too often we have seen some bridging lenders try to compete with legitimate low-rate loans by advertising low rates but failing to mention other significant fees included in the agreement. This practice is really, in the long run, detrimental to the credibility and reputation of the overall bridging industry and is certainly not the correct way to enter the rate war.
From the perspective of Funding 365, we have participated in slashing our interest rates to exceptionally aggressive levels – however, we have not done so to the extent that our service, speed or offering is compromised. Our residential bridging loans start at 0.65% per month and our commercial bridges at 0.75% per month. These rates are (we believe) among the cheapest non-bank offerings, and actually are cheaper than quite a few of the banking offerings in the bridging space.
To conclude, it’s often a misconception that a low interest rate is the most important factor when choosing the best possible short-term funding option. It is often forgotten how an increasing number of brokers and borrowers are seeking forward-thinking lenders who thrive on other key attributes, namely service, speed, transparency and creativity.
It’s almost certain that 2018 is destined to observe continued innovation and cutting-edge interest rates within the industry.