Like many readers of Mortgage Strategy, I’m sure, I have received emails from short-term lenders offering non-regulated residential bridges up to 90 per cent LTV.
Yep, you didn’t misread that, I repeat: 90 per cent LTV.
Now I’ve been saying for some time that lenders could maybe start improving their LTVs a bit, as rates are about as low as they can reasonably go.
But when I meant ‘improve’ I certainly didn’t have 90 per cent LTV bridges in mind. That kind of bridge is a bridge too far.
In prime and super-prime central London, 80 per cent LTV bridges are neither unreasonable nor uncommon. But 90 per cent LTV? Even in the most prestigious areas of the capital I would consider that kind of loan-to-value reckless. A 90 per cent LTV bridge on a buy-to-let in, say, Barnstaple is a recipe for disaster.
The bridging industry has only recently started to get its house in order. Since 2009 it has really cleaned up its act and these days there is a new breed of responsible lenders who are all about establishing bridging as a viable alternative finance channel — rather than make a quick buck.
But this kind of product is dangerous and, if it went wrong, could see the industry slip all the way back down the ladder.
Now don’t get me wrong: I want the bridging industry to continue to grow, but I want it to grow at a sensible pace and with the right kind of product innovation. But a 90 per cent LTV bridge? Unless it’s secured against Buckingham Palace or St Paul’s, I just don’t think that’s sensible at all.