Bridging has developed from simple stopgap funding at auction to a significant source of development finance
It is that time of year where we both take stock and make predictions. As someone at the coalface of the bridging market, I want to look at what affects brokers and their clients and what I would like to see down the track.
Talk earlier this month of a £3bn bridging industry would have raised eyebrows 12 months ago. Yet the steady upward growth trend this year is already nudging that number.
New lenders and sources of funding have been part of that growth spurt but let us not forget that the infinite flexibility of the product has produced a facility that covers so many areas of the lending spectrum. It has developed from simple stopgap funding at auction to a significant source of development finance, serious support for buy-to-let lending and a key source of emergency funding for personal or business use.
But next year should also be named the Year of the Cast-Iron Bridging Exit Strategy. While rates are at their lowest for all types of lending, clients that allow their bridging loans to go over the designated period are putting pressure on themselves financially. It is not a comfortable position for an adviser if the exit is fudged.
In the buy-to-let sector, bridging finance is becoming a go-to source, but I want to see fewer clients coming to us without a strong, workable means of exiting their bridging loan. There are lenders still prepared to accept weak explanations but the implications and penalties can be very serious.
One of the indirect effects of the Mortgage Credit Directive next year will be to provide a further incentive to ensure clients get into bridging with as good an opportunity to exit successfully. The intermediary community will need to play its part.
I have no doubt that every bridging sales director and BDM will be looking at ways to sustain the excellent progress made this year as expectations will be high in every boardroom to improve further in 2016.
Specialist packagers are also looking to see a continuation of the successful recipe of lower rates, more choice and greater competition among a growing number of lenders. Allowing market forces to lead has, so far, been good for all parts of the chain, from lenders to borrowers.
I see that combination continuing in 2016. Unlike some, I do not view the MCD as a brake on future new business. The industry is already adjusting to the requirements and challenges posed and will be all the stronger for it, in terms of both quality and competence.
Next year should also see the more forward-thinking specialist packagers taking advantage of technology, particularly in the area of application submission and sourcing. With greater pressure on brokers to demonstrate evidence of research, being able to access a clear, verifiable audit trail will be a vital component in choosing a specialist partner.
But technology, particularly in the bridging market, needs to be regarded as a helpmate rather than a total solution. Human experience and understanding of each applicant’s specific circumstances are the most vital parts of what we offer.
Finally, as the talk at the pumps is of a possible return to petrol prices dipping below £1 a litre, the only other item on my Christmas list is for average bridging rates to dip below the magic 1 per cent a month mark. Perhaps this is wishful thinking but it would help towards further increasing credibility for the long term.
Phil Jay is director at Complete FS