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Rise to the bridging challenge but proceed with caution – Benson Hersch

by: Benson Hersch, chief executive, Association of Short Term Lenders
  • 06/09/2016
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Rise to the bridging challenge but proceed with caution – Benson Hersch
Team GB’s brilliant performance at the Rio Olympic games has given the country, and let’s not forget that includes athletes from Northern Ireland, a much-needed lift in the wake of the post-referendum funk.

There are lessons to be learnt from this – the one being that you can solve some problems by throwing money at them provided that you select your recipients carefully. The other is summed up by one Union Jack which had the word “Believe” emblazoned on it.

As US President Franklin D Roosevelt said in his first inauguration speech on Saturday, 4 March 1933, “…let me assert my firm belief that the only thing we have to fear is…fear itself…”. These were brave words, but in fact it took the industrial impetus of the Second World War to reassert the US to the status it still enjoys today. Words alone thus cannot solve problems, but attitudes can.

To return to the Olympic theme, it’s the attitude of British athletes that carried them to new heights, not just the gold medal winners, but the will to succeed shown by those who were pipped at the post, or who achieved personal best performances.

The bridging market is awash with rumours about banks withdrawing lines of credit to lenders and anecdotal evidence suggests that some of these rumours are at least partially true. Aldermore Bank has decided to exit bridging to concentrate on core lending areas. This does not mean that some bridging lenders are not still doing record business and there are also firms still preparing to enter the bridging sector. Some other firms may leave, but this is inevitable in a capitalist economy.

Bridging lenders do need to be aware of changes in the long-term refinance market, especially with regard to loan-to-values (LTV). With some lenders now requiring 150% rental cover on buy-to-let mortgages and others trimming their LTVs on higher-value properties, 75% bridging LTVs need to be advanced with caution.

There is some weakness in the property market, but Countrywide’s prediction of UK house price growth slowing to 2.5% in 2016, before falling by 1% in 2017 is hardly a disaster. Even London prices, predicted to fall by up to 6% in 2016, are expected to resume increasing by 2018. In any case, many of the falls were inevitable, even before the referendum results.

We certainly do live in interesting times. Let’s rise to the challenge.

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