The biggest post-Brexit problem has been lenders pulling out, and speed and surety of lending are critical for bridging
Although the Brexit vote appears to have knocked for six some parts of the mortgage market, others have prospered.
The Association of Short Term Lenders’ figures for Q2 revealed a 61.5 per cent quarter-on-quarter increase in the value of bridging loans. A recent survey among its members also found sentiment to be high, having bounced back significantly from the week after the referendum.
Figures for Q3 could well be on the up too, which appears to have been backed up recently by the Bridging Trends report, which showed an increase of more than a third between Q2 and Q3.
Not everyone has experienced the same fate, however. For example, some medium-sized bridging lenders found their funding lines pulled thanks to the uncertainty plaguing investors over what will happen to the UK property market.
That said, demand on the whole remains strong. It seems brokers and borrowers are looking for fulfilment from the lenders they know have the funds to lend.
A recent poll revealed that the biggest post-Brexit issues for the industry have been the number of lenders now pulling out of deals, followed by a tightening of criteria. Time is a critical factor for both bridging and commercial deals, and so therefore is surety of funds.
If a borrower has been told a lender will provide them with funds it is crucial they know they will receive the amount agreed in the timescales required. Any broker finding this not to be the case should switch from that lender immediately or risk having their own reputation damaged.
When does unregulated mean regulated?
Last week, the FCA announced it would consider taking action against unregulated firms, stating it was prepared to intervene in activities that could cause widespread damage.
In a consultation document on the matter, it says: “We will prioritise intervening outside the perimeter [of regulated activity] when we believe our objectives are threatened, if we believe an unregulated activity is illegal or fraudulent, has the potential to undermine confidence in the UK financial system, is closely linked to, or may affect, a regulated activity, or calls into question the suitability of the firm.”
Although I believe there is already enough industry regulation, there is also a need for guiding principles that every firm should follow. In addition, there should be consequences for any firm intentionally causing consumer detriment, because it risks pulling the whole sector into disrepute.
The ASTL has done a huge amount of work in the past few years to improve the reputation of the bridging industry, including bringing in its own Code of Conduct and Values Charter that all members must sign up to.
None of these measures are rocket science, however. They include: acting “in a professional manner with honesty and integrity in dealings with customers”; “disclosing all costs and fees up front with no small print or misrepresentation”; and “not issuing terms or fees where [a lender] does not expect to lend”. Every respectable firm should be following these values as a matter of good business practice.
The FCA announcement is positive because it sounds as if it will target rogue operators rather than the market as a whole. By knocking out any bad apples, this will help preserve the positive reputation the bridging industry has worked so hard to build up.
Jonathan Sealey is chief executive at Hope Capital and a member of ASTL executive committee