As we’re now in September it’s time to go back to the basics of bridging, as published in Bridging and Commercial.
The return to school is and interesting time to reflect what the next term will bring for the bridging industry and how the end of term report may read.
With Brexit in the way and all types of political shenanigans, the political and economic environment is as uncertain as ever. Preparing for this scenario, will easily be as challenging as revising for the new style GCSEs where no-one knows what the marking will look like.
Despite the uncertainty, the market is proving remarkably buoyant. Indeed, it is a fortunate phenomenon that bridging tends to do well both in an upturn, when developers are focused on new gains, and during a downturn when businesses and individuals struggle to get funding from mainstream sources.
Many people seem to have given up waiting for Brexit to happen and are just ‘getting on with things’. The ASTL’s member figures recently showed that bridging loan books grew 11.7% to a record £4.62billion in Q2 of this year.
We cannot be complacent though as it will not necessarily be an easy job to maintain this level of lending from here on. The biggest thing lenders can do to help the bridging market keep growing is ensure that their lending is of the highest standard and due diligence is at the heart of everything.
While the levels of professionalism have risen dramatically over the past few years, it is essential that bridging lenders operate to the highest standards. This includes not lending to people who clearly will have no way of paying their loan back.
It is inevitable that other factors will come into play when deciding whether to lend over the next few months. Lending against a commercial property owned by an export/import business highly reliant on the EU market will be a less safe bet than a developer converting an old building into flats for example.
Whatever a lender decides, as any teacher will tell you, it is also essential that they then do what they say they will. We are still encountering too many situations where lenders say ‘yes we will lend’ and at the last-minute change their minds. Sometimes this is because new information comes to light which changes the lending proposition from a good risk to a bad one. More often, it is because a lender thought it would be OK but had to go to an external credit committee for approval who then overturned the lender’s decision.
This not only gives the lender a bad name, it can cause the borrower a huge amount of stress and also damage the broker’s reputation. While it is obviously good news for lenders like Hope Capital who ultimately end up with the business, it is not so good for the bridging market as a whole if it gets a reputation for lenders who renege on their promises.
Ultimately the bridging market is in a positive place. Sentiment is remarkably high, the number of new loans is increasing and the market is growing as a result. Sensible lending and lenders doing what they say they will, will help this to continue, not only until Christmas but for the long term.