The latest figures from the ASTL’s quarterly review indicate that members are still experiencing strong growth, both in enquiries and completions.
The annual figure of £3bn has finally been breached. This validates the confidence shown in our sentiment survey earlier this year, which revealed, 70% of respondents expected the volume of their own business to grow.
In the same confidence survey, only 59 % expected the total bridging market to grow, with 12% expecting it to shrink. Confidence in the long term growth of the UK economy as a whole was even lower, with only 43% expecting positive results.
What is underlying these figures? Well, it seems that some smaller lenders are exiting the bridging market as lower pricing makes the risk-reward level less enticing, particularly in the current more problematic property market. Also, brokers are increasingly aware of the growing professionalism of established businesses, who offer transparency and certainty as well as lower pricing.
In addition, many smaller “under the radar” lenders are not sufficiently au fait with the current regulatory and prudential climate. This may not affect their ability to make loans, but will certainly impact on the likelihood of exiting via refinance with mainstream lenders. The financial effect of these restrictions is growing. Allied with mainstream lenders’ concerns about long-term trends, the level of government and personal debt has reached frightening heights.
Public finances are in a mess. Spending has increased every year in the past 30 years (despite “austerity”); National debt has doubled in the past seven years. Brexit has caused this problem to become even worse.
So, in these dangerous times, although the threat of increasing interest rates has receded for the moment, it’s really only established well-run firms that are likely to weather the storm.
Although barriers to entry to the short-term property lending market are low, new entrants are hampered by the shortage of experienced and competent underwriters, as well as the strength of relationships. Interestingly, a broker recently told me that he would be loath to approach new lenders unless they fell into the category “new lender, old team”, as delivery and competence were more important than price. Lenders need to bear this in mind when reacting to competition, especially by increasing LTVs.