In 2021 we saw the value of bridging loan books top £5bn for the first time and a growing number of brokers are recognising how they can use bridging finance for their clients. Competition amongst lenders is driving rates down and this e pricing is making bridging more accessible to a wider group of customers.
I like to think of bridging as an important cog in the workings of the wider property market. What we do facilitates activity elsewhere in the market – from saving transactions to enabling investors to buy, convert and refurbish otherwise unmortgageable property. As more brokers recognise the benefits of bridging and lenders continue to compete on rate and criteria, the cog that bridging represents is only going to become larger and more influential.
This is great news and I really think we will see bridging loan books grow further in the next year. However, it comes with a word of caution. Low rates are a good thing for customers, but a sustainable lending market is only achieved as a balance between risk and reward. I am sure this will not happen but, if lenders that cut rates lower underwriting standards at the same time, they could find that they are left exposed financially.
As we enter another year of pandemic, there will be continued uncertainty around exit routes and robust underwriting today, will undoubtedly mitigate against problems further down the line.
It’s also important that lenders and brokers take a robust approach to their policies and procedures and we know that ‘ambulance chasing’ claims companies are currently assessing the bridging market. They will be looking for areas where they may be able to secure compensation for customers, and a revenue stream for their businesses and one main thrust will undoubtedly be the issue of undisclosed commissions.
The outcome of a court case last year makes it clear that if a lender has paid a commission to a broker which has not been disclosed to the borrower, that lender is now more at risk of the entire loan being set aside. And where a loan is set aside, this can mean that a lender will have to make a substantial payment to the borrower and, in some cases, the lender might also be required to pay damages. This will clearly be high on the agenda for the claims companies so it’s important for businesses in our sector to ensure they have watertight, customer-focused policies.
However, even amidst this caution and the shadow of the Omicron variant, there are plenty of reasons to be positive about the outlook for bridging. The market is growing in recognition and reputation and has the potential to become a bigger part of every broker’s business this time next year.
Vic Jannels, CEO of the ASTL
A version of this article appeared in the January 2022 online edition of Business Moneyfacts