It’s almost 11 years since the unthinkable happened in the UK banking sector. September 2007 saw a “run” on Northern Rock with queues forming outside the branches of the former building society. People wanted their money – but the bank was running out of cash, as well as sources of funding. The subsequent collapse of Northern Rock was the first signal to the British public that the credit crunch had arrived in the UK.

People panicked. Consumers stopped spending. High street shops started closing down. High street funding rapidly dried up as mainstream lenders tightened up their lending criteria. This presented an opportunity for specialist lenders to establish themselves and grab an increased market share.

Some high-profile bridging lenders who thought the good times would roll forever were caught out. As property prices started falling and housing market activity slowed to a crawl; the impact of so-called “liar loans” and irresponsible lending practises started to show.

In this challenging environment, bridging lenders felt the need for a platform where they could learn from each other, and improve the professionalism of the sector. In March 2018 the Association of Short Term Lenders (ASTL) was established, initially with 17 lenders. Andrew Bloom, CEO of Masthaven, says: “In doing so, the ASTL should rightly be credited with moving the short-term finance sector from a cottage industry right into the mainstream – where it truly belongs.”

The ASTL sets high standards which members need to meet. It also helped HM Treasury, the Financial Conduct Authority and the Financial Ombudsman Service understand the short-term lending sector better. Membership of the ASTL has grown to 35 members and 28 associate members.

The big question for ASTL members is: should we be preparing for another crash? These are undoubtedly uncertain times. The Royal Institute of Chartered Surveyors (RICS) says tax and stamp duty reforms have impeded the growth of the private rented sector. Meanwhile the housing market as a whole is slowing and properties are taking longer to sell. Should we be worried?

Personally I think that we could see an economic downturn in the short-term. This will mean that, as in 2008, there will be opportunities for the bridging sector, but also dangers we need to be aware of. There will inevitably be casualties and lenders need to embrace technology to meet the demands of a changing world.

This quote from Alex Massie in The Times – about cricket – can also be applied to the bridging sector.

“Savour it while you can, for it will not be with us very much longer. Cricket can just about afford this rosy melancholy; as a society, politically and economically, we cannot.

Cricket’s struggle is only a small part of this much greater and eternal, quandary: how to manage change so things may remain the same but slightly better? Hard enough at the best of times but daunting when you sense a great storm is brewing.”

Benson Hersch, CEO of the ASTL

A version of this article appeared in the September edition of Specialist Lending Solutions

 

 

The Association for Short Term Lenders (ASTL) has today announced its new executive committee for the upcoming year, to take effect from 1st September 2018. All members of the committee are appointed directors of the Association. The seven executive committee members are tasked with providing direction and guidance to the lending industry as well as making decisions on behalf of ASTL members

There are four new board members: Sarah Jackson (Pivot), Narinder Khattoare (Kuflink), Anita Kirkbright (Amicus Finance) and Jonathan Newman (Brightstone Law). They join Benson Hersch (CEO) and current board members James Bloom (Masthaven) and Brian West (Central Bridging).

The ASTL’s membership’s rules provide for all members of the committee, except the CEO, to retire after serving a maximum of two years. Every year, those interested in taking up the available spaces on the committee, put their names forward and are then democratically elected by the ASTL’s wider membership.

Benson Hersch, CEO of the ASTL says: “As we celebrate ten years of the ASTL, we will look to our new Board to shape the direction and standards of our members, and the wider industry. The appointments of Sarah, Narinder, Anita and Jonathan will provide us with the skills and experience to ensure the continued growth of the ASTL membership and strengthen our position as a market leading voice for the short-term lending sector.”

Press Release, Wednesday 5 September, 2018

The past few years have seen technology reform the mortgage industry, with a rise in the number of “fintech” companies developing technology with the aim of improving financial transactions.

From mortgage comparison sites and open banking to a complete digital mortgage experience, technology has helped streamline the entire mortgage process. Automated processes and the associated time savings and reduced costs are undoubtedly good for both customers and brokers, but can the same technology help the bridging sector?

Bridging is traditionally seen as a product which requires human involvement with bespoke and tailor made solutions. So it’s understandable there’s some debate about whether so-called “robo-advice” – automated, algorithm-based advice delivered online without any human interaction – can be a game-changer in the bridging sector.

On the plus side, brokers can benefit from technology at the research stage, when they will want to know and evaluate the products on offer for their clients’ particular circumstances. Automated systems can also be used to keep all stakeholders informed during the loan application process through to completion.

But property investors will also crave the reassurance and confidence that comes with dealing with a professional and experienced human adviser. Advisers themselves can use technology to improve performance, efficiency and profitability. Increased automation could also help during the underwriting process by speeding up the gathering of customer and property information, analysing and acting on that information.

The finance industry faces a tricky balancing act between implementing effective anti-fraud measures, while still offering a frictionless customer experience. Criminals are increasingly using technology to commit fraud – by hijacking conveyancers’ email addresses or falsifying documents, for example – but lenders and brokers can also use technology to put together an effective counter-fraud strategy. But while algorithms can examine data and decide if an application is credible, we still need quality and experienced underwriters to cast an eye over all application data.

Future fintech innovations in the bridging sector may look to focus on speed. Clients such as property investors often look to bridging lenders to provider funds faster than average. So any fintech solution that can cut down the points at where an application may be held up or delayed will be welcomed by the industry. Transparency is key too; so real time tracking solutions which allow the client, broker and lender to see where an application is in the process will be useful too.

Technology is already being used to verify identities. For example, GOV.UK Verify is a secure way to prove who you are online. The government-backed system partners with various companies such as Experian, the Post Office and Barclays to verify individuals’ identities without them having to show documents in person or wait for something to arrive in the post. The next step is for Verify to connect with the Land Registry so borrowers can sign their mortgage deed online.

Whatever kind of technology bridging companies opt to use, it’s vital to understand how people access the internet these days. Sites and systems will need to be optimised for smartphone and tablets, and apps developed where necessary.

Benson Hersch, CEO of the ASTL

A version of this article appeared in the July edition of Mortgage Solutions (web)

Figures compiled by the ASTL’s auditors from its bridging lender members for Q2 2018 are slightly down on the exceptional figures for Q4 2017 and Q1 2018, but annual completions continue to rise and are now £3.87 billion.

The value of loans written for the quarter ending 30 June 2018 revealed a decrease of 6.6% compared to the previous quarter. However, annual completions rose by 27.2% compared to the year ended 30 June 2017. In comparison to the same quarter last year, the value of loans written in the quarter has increased by 10.3%.

Total loan books are continuing to climb, with a rise of 13.1% compared to Q4 2017. Compared to the end of Q2 2017, the value of loan books has decreased slightly, but is still over £4.2 billion.

The pace of increases in applications reversed the massive jump in Q1 and decreased by 2.9% (compared to an increase of 28.9% in Q4 2017) compared to Q1 2018. On an annualised basis applications are up by 16.3% on the year ended June 2017; making up a total of £20.2 billion. Although applications do tend to be unreliable indicators and are dependent on how many lenders are offered the same deals, this trend shows how large the sector has become.

Benson Hersch, CEO of the ASTL says: “Although figures for Q2 2018 are down on the two previous quarters, they remain high. Our members continue to provide flexible and useful services to customers who require finance. The property market may be difficult at the moment, but responsible bridging lenders continue to prosper.”

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

Press Release, Friday 17 August 2018

The demise of the Great British High Street is gathering pace. There was a time when a top name was a gold-plated covenant and the valuation of retail property was simple. That’s no longer the case, as old-established names like BHS and Woolworths have disappeared from the scene. Surviving retailers like Marks & Spencer, New Look and House of Fraser are closing stores across the nation. The same applies to restaurants like Prezzo, for example. Banks are also closing branches and even Oxfam is planning to close some charity shops. The abandoned car park of Toys R Us in Tilling Road, Brent Cross, North London has become a huge fly tipping site.

This phenomenon has also affected small independent stores. Corner shops have been hit by the proliferation of mini-supermarkets owned by the major chains. The small shop with flats above, once a guaranteed income provider is no longer an investment of choice.

The convenience and speed of home deliveries has played a large part in this change. 85% of UK consumers aged 18 or over already shop on the internet. According to Conlumino/Webloyalty, 31% of high street stores will close by 2020. The Javelin Group predicts that 34% of retail sales will grow to 34% by 2020. The likes of Deliveroo and Just Eat are transforming the take-away market, giving customers who are time-poor and cash-rich greater and greater choice.

How will this affect the market? A sign of the times is the appearance of Amazon lockers in branches of Morrisons, as they hope to piggyback on on-line sales. Chain stores may get smaller as the bulk of stock will be available on a click and collect basis. Some individual stores may survive if they offer customers something to make the “shopping experience” more exciting. But large department stores may go the way of the dinosaurs and new uses will need to be found to fill the empty buildings. Possibly there may be a new wave of permitted development, allowing upper floors to be changed to apartments or hotels. They could also provide cheaper office space in areas where public transport connections are good.

House prices, too, will be affected. Whereas proximity to shopping was once a major factor, in some cases speed of internet connections may be more important. With technology making working from home become more prevalent, people may be happier to move to more remote areas with limited local shopping, but housing is more affordable as they can use the internet for shopping. Fewer homes were sold in London last year than anywhere else in England and Wales, according to an analysis of Land Registry data by Knight Frank. Prices are moving upwards in the North of England and Scotland.

Working at home gives the freedom for people to move where housing is more affordable and where state schools may both be better and less difficult to get into.

Anne Ashworth, Property and Personal Finance Editor of The Times has said than an unexpected side-effect of the slump in property transactions in London (sales in February were down 23% over a year) has been a rise in the popularity of the rental second home used for holidays and weekends; as well as getting a feel of what it would be like to live out of a major city.

In underwriting and risk assessment, access to information is easier, making informed decisions more likely. In this respect, experience and artificial intelligence can work hand-in-hand to produce the best result. Availability of credit reference and fraud prevention systems can likewise help to prevent costly errors.

It’s a new world of wonders out there and e-commerce and digital information is growing daily. Consumers are more and more likely to make decisions and access information on mobile devices. Unfortunately, there is also a new breed of digital criminals whose nefarious skills become ever greater.

Lenders should be aware of both the opportunities and problems this presents and embrace the new age with confidence.

Benson Hersch, CEO of the ASTL

A version of this article appeared in the July edition of Mortgage Introducer

 

  1. Property development continues to boom – ASTL members lend £386m to developers in Q1 2018
  2. Oblix Capital joins the ASTL
  3. ASTL quarterly results show continued strength
  4. Continuing to boom