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Bridgingwatch: Parallel lines

There are parallels between bridging and peer-to-peer lending in the flexibility shown in finding ways to complete non-vanilla deals 

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As a busy specialist lending community we do not often get much time to reflect or take a step back to focus on other markets to view their progress and evolution. But this time of year heralds a natural point of contemplation.

A discussion at the recent Association of Bridging Professionals annual general meeting has led me to think more and more about the parallels between the bridging sector and peer-to-peer lending.

The obvious similarities are in the way that many lenders are funded and the flexibility illustrated in finding ways to complete deals. This is in stark contrast with many of the more traditional lending institutions, which still seem intent on finding ways not to lend. 

This attitude and ability to problem-solve at a variety of levels also provides a platform to form an identity and be able to focus on different types of lending rather than aiming to be a ‘one-size fits all’ model, which, more often than not, ends up achieving little.

With lingering issues surrounding mainstream markets when stimulating any type of lending away from the most vanilla of cases, it is clear that the bridging and peer-to-peer parallels will continue. Especially considering the growing prominence of both sectors in picking up the slack across this lending gap.

As such, it seems only a matter of time before these markets are no longer referred to as alternative solutions but considered far closer to the norm. And this recognition will work to intensify the pressure on high-street lenders to address their own systems and procedures for assessing credit and issuing good-quality loans.

Another important issue being addressed across these sectors, particularly in terms of bridging finance, is that some old, shorter-term lending formulae have become a little outdated in certain lending scenarios. For example, 12-month deals are often too short for a number of borrowers, especially for business-related purchases. 

It is great to see additional flexibility being implemented through increased lending on terms of up to 18 to 24 months without costly renewal fees or the threat of charging default interest rates.

So bridging finance and peer-to-peer lending are just two sectors within the industry that will continue their rise in prominence over the year ahead. 

Focusing squarely on bridging, this is even more evident on the back of figures from Capital Bridging that reported lending a record £20m in November and predicted it is on course to double its 2013 lending results. This is a notable achievement and, in the coming weeks, I am sure many bridgers will report some impressive yearly results to underline the amount of growth being illustrated across the whole of the sector.

And it is not just the lenders that are bullish heading into 2015. A recent survey from United Trust Bank emphasises the positive outlook felt throughout the broker community. It shows that two-thirds (66 per cent) of brokers expect the bridging and short-term secured finance market to expand over the next three years. 

Just 7 per cent anticipate a contraction in the market while the rest expect it to stay about the same. Further, nearly half (49 per cent) of brokers anticipate seeing more new lenders join the sector. 

Another important statistic is that nearly a quarter (23 per cent) of brokers operating in the sector completed more than 20 bridging cases in the past year.

All the statistics above help underline how important a component bridging finance has become in many brokers’ businesses – and one that will only increase in the year ahead.

Talking of great years, please forgive me for blowing our own trumpet a little by saying how delighted Brightstar is to have been shortlisted for the Best Broker for Short Term Lending/Bridging in the upcoming Mortgage Strategy awards, especially having just been named Top Specialist Distributor by Precise Mortgages.

It is always a privilege to be recognised in a sector that has some great businesses operating within it. Of course, we, like our competitors and lending/intermediary partners, realise we cannot afford to take our foot off the gas.

Despite 2014 having been such an excellent year across the specialist lending arena, it is vital that we continue developing, innovating and improving service standards to ensure 2015 will see increasing numbers of borrowers find the right solutions.

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