Christine Toner talks to Bradley Moore, Brightstar’s director of secured loans about the European Mortgage Credit Directive, specialist distribution channels, rebranding and what the future holds for the specialist packager.
Q: What impact do you think the MCD will have? Will it be positive?
A: I do think that the MCD will be positive for many where second charge loans are concerned because it will make it much easier for mortgage brokers to provide advice once they can be advised upon in exactly the same way as first charges. This should mean that where it is best advice and more cost effective for a borrower to have a second charge rather than a remortgage or a top up loan they should now find this advice more readily available to them.
The challenges will lie in all lenders having to alter their systems to cope with the new regime and brokers and lenders alike getting used to the new ESIS.
The fact that mortgage offers will now be binding I think is a good thing and I don’t think that the seven day cooling off period will have a big effect as the borrower can override this if they are in a hurry.
The biggest change we may see for second charge lenders is that their criteria is likely to get more restrictive in order to comply with the same rules as first charges, so we could see some of the higher LTV loans drop out of the market for example and fewer second and third charge mortgage products in the short term. But I think that lenders will quickly adapt, that we will see more lenders coming to market in this space and that by the middle to the end of next year there will be many more, highly competitive, second and third charge mortgage products available.
Q: Will the role of specialist distribution channels change?
A: I think that specialist distribution channels will have a slightly different function but the key role they play will stay the same.
Brokers tend to use specialist distribution when they are faced with a client whose needs are outside of their comfort area of what they deal with everyday. If a broker suddenly has a client who has had some credit problems, needs multiple buy-to-let or has any other needs that do not fit vanilla high street lending then they are the times when they are likely to need help from specialists in these areas who are dealing with these cases every day.
The model makes perfect sense as it enables the broker to still provide advice to their client but they then gain access to specialists who know that area of the market well who can help them to find the right solution for their client’s particular needs.
Where it might change is that brokers are likely to look for more than help packaging a case; it is right to expect more added value and look for different options open to them.
Q: You rebranded earlier in the year, what was the thinking behind that?
A: Our rebrand process started with research with our database of intermediaries. Over 80% of respondents stated that they didn’t understand the specialist market well enough to advise clients directly. Therefore the positioning of our brand had to highlight how we can make the process easy for intermediaries to help clients who have otherwise been disenfranchised by the mainstream market for a wide variety of reasons.
There is a perception that, if the client doesn’t fit mainstream criteria or indeed rigid scoring systems, then they are deemed as too difficult to place by intermediaries and for a lot of cases this is not correct. Likewise the understanding of specialist finance needs clarifying as there is a definite perception that specialist means sub prime or adverse and this is not correct. For example we have divisions for second charges, bridging loans, commercial loans and buy-to-let as well as being to help people who may have had credit problems.
We believe that education is key to the success of intermediaries being able to offer specialist finance to their clients who are not able to access mainstream finance so they are catered for and not turned away by intermediaries purely because of a lack of understanding of what’s out there in the market place.
Q: What is next for Brightstar?
A: Brightstar is expanding rapidly. Every team across all of our four divisions of second charges, bridging, commercial and specialist mortgages & buy-to-let have expanded in the past year and are continuing to do so. At the same time we are forging new relationships with both new and existing lenders to widen the product ranges and the solutions available to the intermediaries who work with us.