Wayne Smethurst: Blog

Tuesday 21st August 2012

I’ve been thinking a lot about transparency lately. So much so that I was beginning to doubt whether I really understood what it meant.

According to my dictionary (a well-thumbed Chambers) the definition of transparent is ‘able to be seen through, clear, easily detected, understood, obvious, evident’, with transparency defined as ‘the quality of being transparent’. Yes, that’s what I thought – so it’s not me, then.

Let me explain. You’d think that in this day and age, with transparency being a fundamental requirement in lending, lenders in all sectors of our industry would be transparent about their products.

After all, if terms and conditions are not transparent from the outset, how on earth are introducers supposed to know which product is the most suitable deal? How is the introducer expected to treat their customers fairly if transparency is lacking?

This all came to home to me recently when I was looking at a bridging deal for one of my client introducers.

I laid out for the lender the exact – exact, mark you – details of the case: an 11% LTV, clean, residential, regulated first charge, max 12 months (9 months would be fine), plus postcode and bridging exit strategy. I was being completely transparent by providing the full picture and I asked what rate I should quote to the introducer ahead of submitting a full application.

The response came back within two minutes. Impressive. Certainly can’t fault them on customer service. Cigars all round. But hang on, what’s this?

The lender wasn’t prepared to match my transparency – instead of quoting an actual rate, they said ‘rate starting from…’

So even though I had given them the full picture and they could assess the risk, it looked as though the lender was going to leave the door open to increase the rate once the client was far enough down the line to be committed. What sort of transparency is that?

I’m glad to say that not all lenders in the bridging sector are like this. In fact, for my own use I’ve divided them into two tiers.

In tier 1 are lenders – Precise, Masthaven, UTB, Dragonfly, for example – who publish criteria and terms that are genuine and follow through to completion. Boxed products, as it were.

In tier 2 are lenders who are only prepared to publish guidelines – rates from…, fees up to…, you know the sort of thing – and will only commit to terms and conditions once the case is just about to complete.

Now, I’m not saying that tier 2 lenders are doing anything wrong. They’re entitled, of course they are, to price for risk on receipt of the full picture – and, let’s be honest, they don’t always get the full picture at the start. But unless the diligent packager or introducer researches the market all over again to ensure they’re getting the most suitable deal, how will they know? Will the client have time? Or will the lender take advantage of the client not being able to go anywhere else once they’re well down the track?

Introducers are required to treat their customers fairly. But they can’t do that unless lenders are transparent.

What do you think? Add a comment below or e-mail me at wayne@thefinancecentre.com