In just under 12 months’ time, we will reach two significant regulatory milestones in quick succession: implementation of the EU Mortgage Credit Directive in March, followed by the deadline for full Consumer Credit Act permissions in April.
I am not alone in believing that tighter regulation of the industry is a positive move. Our future success is reliant on high standards and a more customer-focused approach to credit activities, and the bridging market is no exception.
But regulatory change is only part of the picture. As regulation becomes part of the bridging industry’s collective consciousness, so too should the idea of sustainability. While it is tempting to focus on the here and now while the going is good, we need to shift towards a longer-term view that focuses on preparing for the future, whatever it may hold for us.
For me, a sustainable business encompasses building for tomorrow while writing good business in the present. By this I mean brokers and packagers focusing on strategic growth, rather than a single-minded fixation on the current volume of deals.
Of course, that is easier said than done when the bridging industry is doing well. According to the latest West One Bridging Index, annual gross bridging lending totalled £2.5bn in 2014 – an average of £50m in loans a week to people needing short-term funding and a 24 per cent rise on 2013. No lack of market opportunity, then.
But while it may be tempting to take a rosy view of today’s bridging industry, we need only cast our minds back a few years to remember how quickly things can change. Let us avoid the danger of a headlong rush to capitalise on rapid growth if it comes at the expense of a secure business model that can weather the inevitable storms that will come our way.
The regulatory changes we are seeing are a critical layer in the bedrock of our industry’s future development. I share the view of many in the bridging sector that building a sustainable business, rather than taking a here-today, gone-tomorrow attitude, has to involve embracing regulation to improve transparency and customer outcomes; not to mention demonstrating the willingness of our industry to adapt and avoid the mistakes of the past.
Although some brokers work only in unregulated bridging, how long this space will stay that way remains to be seen, with part of the sector already being swept up in the new FCA regime for consumer credit activities.
Those brokers with interim permissions would benefit hugely from getting their resources in place and ensuring that their business culture fits the new environment.
We need to take regulatory requirements seriously and ensure that everyone – from the managing director to the most junior staff member – understands the impact of their role in the business before the MCD comes into force next March.
Sustainability should not be brushed off as the latest buzzword to hit the bridging industry. It is a concept that needs to be wholeheartedly embraced by brokers, packagers and lenders alike.
If we can all shift our priorities towards a more sustainable business model, I am confident it will leave the bridging industry in stronger and more resilient shape for many years to come.