The sector has proved more resilient and adaptable to the changing needs of the mainstream market than anyone could have guessed
The bridging market is about to breach the £3bn mark for the first time and might have done so when this edition of Mortgage Strategy is published. So should we hang up the bunting and have a ticker-tape parade down Oxford Street?
No – not very British, is it? However, this is a significant landmark and bridging lenders and practitioners deserve to congratulate themselves on a fine achievement. No matter which index you use to measure the progress of the sector, it has proved to be more resilient and adaptable to the changing needs of the market than anyone could have guessed.
From its start as almost a cottage industry, bridging truly came of age through the upheaval caused by the 2007/08 credit crunch and the subsequent retreat of traditional lending. As a means of providing a readily available form of liquidity for businesses, bridging has been invaluable. Its ability to grease the wheels of business during the downturn will in time be regarded by historians as being of particular importance.
Spreading the word
There is no doubt in my mind that the role of intermediaries should also be better appreciated. I only have to cast my mind back to the Expos I attended during the financial crisis to remember that some of them had 20 or more bridging lenders in attendance. Cynics may complain that there was too much bridging in evidence but the broker community took the significance of a source of short-term finance seriously and has enthusiastically embraced the many uses to which bridging can be put.
As well as the Expos, we have seen the lenders compete for quality business, probably in a way not observed before. We now have much lower rates, specialist workshops (I cannot wait for Precise Mortgages’ Roger Morris to have his own TV channel), bridge-to-term products, medium-term loans up to five years and 100 per cent lending.
But it is perhaps the flexibility of the basic product in fitting so many uses that makes the bridging proposition such a strong all-rounder. From its humble beginnings as a friend of auction buyers wanting to secure property before their main finance was in place, bridging is still surprising brokers and clients with its ability to adapt to so many roles, which is why those workshops of Mr Morris are so popular and important.
Also, I have not seen much evidence for the view that bridging was being used in any wholesale way to provide an underhand means for clients to obtain finance by the back door. The idea that established mortgage brokers would risk using stopgap funding, with no way of gaining a longer-term solution, in any large numbers just seems absurd.
What has come across our enquiry desk is the commercial refinance case where the originating broker has not quite nailed down the exit. This is not too impressive and may cause some deviation from the borrower’s expectation of rate and terms.
Statistically, the evidence shows another staggering year of progress. Rather than 2015 being a year of consolidation, Association of Short Term Lenders figures show that the value of the overall loan book written by its members in the year ending June 2015 increased by 39 per cent from June 2014. Additionally, far from demand being diluted by the return of some of the bigger banks to smaller business lending, the value of applications to Astl members increased by 34 per cent year-on-year in the same timeframe.
No, not the social ‘Season’ so beloved of the newly mega-rich desperate for acceptance and of our own fading aristocracy. This is peak Expo season and I urge intermediaries to take the time to attend one or all of the industry Expos, which are centred on London over the next two months. The Financial Services Expo, Mortgage Business Expo and Finance Professional Show all take place in the capital in September, October and early November respectively. And apart from the bridging message, there is a range of seminars and providers for every taste.
As our industry continues to become more professional, the need to be better informed has never been more important. For those of you in the South of England, my own company is holding a specialist lending Expo on 29 September near Southampton featuring some of the biggest names in the market.
Our industry has never been able to provide more connectivity than it does now for intermediaries to assimilate new information and be part of the massive transformation taking place in the lending market.
The increasing importance of bridging as a component in any adviser’s arsenal means we should be taking every opportunity to learn as much as we can to pass on to our clients.
So let us celebrate the new-business figures for bridging – but only as a part of our realisation that its strengths as a lending tool are now so well established that it should be considered as part of the mainstream and no longer the poor relation.