Data from the FCA showed regulated bridging customers contrasted strongly with the stereotypical version, with just 3.3% of bridging loans going to credit impaired clients.
The regulator found bridging customers ware typically wealthier, older, more likely to be self-employed and bought bigger houses than standard mortgage customers.
Speaking at the Association of Short Term Lenders (ASTL) conference, FCA technical specialist Lorna O’Brien said the data “paints quite a rosy picture of the sector that’s a long way from the heavily-indebted, sub-prime borrower who’s using bridging as a last resort that we’ve been worried about in the past.
“Of course this is based on the data you report to us and on regulated firms, and we do remain vigilant to what’s going on outside the regulatory perimeter and we will continue to monitor that.”
She added these were industry averages: “Obviously we can then drill down into each firm – if we see issues with individual firms we can take them up with the firm.
“It’s still early days and I still suspect that maybe not all regulated bridging loans are being reported to us, which I’d like to say to regulated firms, please make sure you are reporting to us.”
Come a long way
O’Brien noted that the regulator was curious to find out more information about bridging customers and whether the product was providing a solution for an under-served part of the mortgage market. “That’s a question we’re very interested in,” she continued.
“We have some regulatory data and it is suggesting that from the amount of retired people who take-in bridging lending there is a clear demand. I would be very interested to hear from the people who are doing the lending about what kind of customer they are servicing.”
O’Brien also raised questions about the future of the sector and how it could adapt to market changes.
“Bridging finance has come a long way in recent years, but there might be challenges ahead,” she said.
“One question might be how any slowdown in the buy-to-let sector might affect bridging, or what reduced housing market activity in London and the South East might do, given the concentration of bridging in this region.
“Other questions might include the impact of fintech firms who aim to challenge the status quo and also the potential emergence of new business models such as peer-to-peer,” she concluded.
The FCA data revealed:
- Bridging is much more concentrated in London and the South East – around 40% of loans are in these regions compared to 26% for standard mortgage lending;
- Significantly less bridging lending takes place in the north of England, Scotland, Wales and Northern Ireland;
- Median bridging loan value is around £208,000, compared to £143,000 for a standard mortgage;
- Median property value is significantly higher at around £550,000 compared with a normal mortgaged property value of £230,000;
- Significantly more bridging loans are on detached houses – 51% compared with 23%;
- Average bridging customer age is 56, compared to 37 for a normal mortgage;
- Bridging customer are more likely to be self-employed – 31% vs 11%;
- Bridging customers are also significantly more likely to be retired at 28% vs 1% standard mortgage customers.