Until the markets settle, funding for bridging clients will still exist but brokers may have to look for it in different places
Markets have been in disarray since the UK’s vote to leave the EU, with many investors thinking twice about putting their money here. While this may be a short-term situation, it means there is a likelihood many small and medium-sized lenders, especially in the bridging sphere, could start to lose their funding lines.
Alternatively, they may find funding lines are reduced in size or external credit committees get a bit more heavy handed in saying what lenders can or cannot lend on. This cautiousness may result in loan-to-values getting lower, rates getting higher or, as we have already seen in some cases, whole product lines being pulled.
That said, it is not all bad news. What we are likely to see is the market changing shape. It could evolve so that smaller lenders with their own funding start to dominate. A number of firms with their own funding are not only continuing to lend at current levels but looking to increase this further. For these lenders, there is no need to reduce either funding or LTVs.
Most bridging loans do not exceed 75 per cent or 80 per cent LTV, so they remain relatively cautious compared to mainstream residential loans. As long as underwriting is shrewd and due process is followed, there should be no reason for firms with their own funding not to continue expanding with the same LTVs, the same rates and, if required, even bigger loans.
It may mean brokers have to look in different places for the funding their clients need. But that funding will definitely be there for sensible, well thought-out cases provided by sensible, well-structured lenders.
Jonathan Sealey is chief executive of Hope Capital