View more on these topics

Commercial break

With the residential market slowing, clients and brokers are turning to commercial property.

Some commentators are arguing that the next big success story for mortgage brokers could be commercial property.

Mortgage Intelligence managing director Sally Laker is among those voices predicting more brokers will start dealing in commercial property in the coming year.

She says that over the last six months clients with substantial buy-to-let portfolios have been increasingly looking to commercial property as the natural next step.

This trend is supported by research conducted by Mortgages for Business earlier this year. It indicates that around 70 per cent of professional BTL investors already have an element of commercial property in their portfolio and 89 per cent of those who currently do not invest in commercial property are planning to widen their portfolio to include commercial property.

Laker says many brokers have been put off by the difficulties involved in getting access to commercial lenders and many advisers are referring clients to brokers specialising in that area.

Mortgage Intelligence now offers its members a service with expert assistance from a commercial specialist without having to hand over the business.

Laker says: “The biggest hurdles to get over include knowing what questions to ask. There is a lot more and a broader range of information required when dealing in commercial lending, with different properties requiring different details. Residential lenders generally use one set of information but commercial lenders often require different sorts of information.”

There are other reasons why brokers might have commercial property on their agendas for next year.

Mortgages for Business says the residential BTL market has seen a tightening in rental yields over the past 12-18 months and the housing market is slowing down and showing some price falls.

Brokers could choose to deal in this market for three main reasons – they are fed up with the regulatory burden of dealing in residential loans, they feel they have the skill set required to deal successfully in commercial that is not required when dealing with residential lending or they are primarily attracted by the considerable fees that can be secured through commercial property.

Mortgageforce managing director Rob Clifford says: “It could be more likely to appeal to brokers who want to avoid the reach of the FSA.”

But he thinks that commercial and other non-regulated mortgages such as BTL will not escape the FSA’s radar for long and will be regulated at some stage in the future.

Looking to the abilities that commercial brokers need, Mortgages for Business marketing manager Jonathan Moore says: “Commercial mortgage terms are not set in stone, so there is a lot of negotiation involved at meetings with various lenders. The other key skills that successful brokers have are knowing how to present cases and accounts to lenders.”

The rewards can be substantial for brokers with fees usually 1 per cent from the client and 1 per cent from the lender and in the sub-prime commercial market, brokers can expect to double this.

Clifford makes the point that there are suggestions that increasing the national weighting towards commercial property may help the pension crisis but he feels the opportunities for entrants into commercial mortgage brokerage market are finite.

He says: “Recent research showing 66 per cent of new lending on commercial property emanated from private property companies, 13 per cent from quoted property companies and 20 per cent to high-net-worth individuals. The structural peculiarities of retail, industrial and office property markets and the mix of hybrids are complex. Could brokers realistically dip into this area? I doubt it.”

Recommended

UniVen captures the future

Noble & Company is sponsoring the UniVen VCT, a venture capital trust that invests in university spin-out companies and other early stage intellectual property based companies in the technology sector.

Timetable for depolarisation

December 1, 2004Depolarisation rules take force. Transition period beginsFirms wanting to depolarise must inform the FSADepolarised firms must implement all rules simultaneouslyJanuary 14, 2005FSA rules for general insurance and protection beginNew disclosure documents and statements of client needs and demands implementedAll firms must have procedures for referring complaintsJune 1, 2005Transition period ends. All firms must […]

Investment view

The dollar slide is not having too great an effect on markets – perhaps it is the seasonal factor, says Brian Tora

Aiming for global growth

Investec Asset Management has created an onshore version of its offshore global energy fund in response to IFA demand for a Ucits-qualifying fund in this sector. The fund will mirror the Guernsey-domiciled GSF global energy fund and will aim for growth by investing globally in companies involved in the explanation, production or distribution of oil, […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment