In a recent survey of ASTL members it was somewhat surprising that despite an increasing lack of confidence about the future of the UK economy, respondents remain confident in the performance of their businesses.
No less than 70 per cent expect their business volumes to grow, 24 per cent expect volumes to remain constant and only 6 per cent expect shrinkage. Their expectations for the bridging industry as a whole are only slightly less optimistic, with 59 per cent expecting growth, 29 per cent expecting current volumes to remain more or less static; and 12 per cent expecting shrinkage.
This is despite the fact that 41 per cent expect property prices to decrease. It raises the question – are they living in a fool’s paradise, or is there some logic in these figures?
My view, possibly foolish, is that there is logic. As the growth in property prices slows or even reverses, mainstream lenders are likely to react by becoming more cautious, with tougher criteria and lower LTVs. This represents an opportunity for bridging lenders. A positive trend seems to be that, as smaller lenders who operate under the radar find that the risk-reward ratio is not what they thought it would be, brokers are directing customer to more professional providers.
As knowledge of the uses of bridging finance increases and the number of bridging firms grow the scope of their offerings, volumes will continue to increase.
Bridging is there to enable businesses to grow, to take advantage of opportunities and make decisions without having to wait interminably for answers. It’s not the cost of funding that is the issue, but the opportunity cost of not being able to do a transaction that is more important. Maybe it’s time to call this form of funding “project finance” or “short-term finance” rather than “bridging”.
This doesn’t mean that traditional bridging, primarily in the owner-occupied regulated area, is not still an important means of allowing consumers to realise their objectives. What is notable is that bridging is becoming more professional, both by providers and borrowers.
The ASTL has been in the forefront of encouraging lenders to conduct business in a professional way, irrespective of whether the loan is subject to regulation or not.
Benson Hersch is chief executive of the Association of Short-term Lenders