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Bridging finance: It’s all a matter of confidence – Paul Day

by: Paul Day, sales development director, Clever Lending
  • 13/03/2018
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Bridging finance: It’s all a matter of confidence – Paul Day
Confidence is high in the bridging finance market with many lenders expecting 2018 to be another positive year for short-term finance.

 

However, there remains uncertainty around a few political and regulatory issues, such as Brexit and the impact on buy-to-let from the changes implemented in 2017.

But industry bodies are reporting an overall optimism, as lenders respond to the changing legislative landscape with new products and criteria geared towards a wider property class and, more acceptance of funding for non-property projects, such as business expansion.

For example, according to a survey from the Association of Short Term Lenders (ASTL), more than half of lenders expected to see the market increase in 2018 and even more thought their own lending would grow.

This trend has been reflected at Clever Lending, with 2017 seeing a 48% increase in bridging enquiries on 2016, business written up 16% and average size of bridging loan increased by 25%.

The growing number of options now available mean that when an enquiry is presented, the solution proposed may not be what the client or broker originally considered.

There is now a lot more choice than ever before, which in turn means more satisfactory outcomes.

 

Issues on the horizon

However, it’s not all roses in the bridging garden.

A recent survey from the National Landlord’s Association (NLA) has found one in five landlords are looking to sell at least one of their properties this year, the highest level of intended property sales in a decade.

This is the result of a number of legislative changes such as the 3% stamp duty surcharge, the withdrawal of mortgage interest relief and stress tests that have been introduced.

One way of easing the burden for landlords is that they charge higher rents putting an even bigger squeeze on housing and the rental sectors.

And if, as reported, a number of landlords are set to pull out of the traditional buy-to-let market, there could be fewer properties for private renters to choose from, so putting further pressure on the already fragile rental sector.

 

Carillion collapse

There may also be a potential impact on underwriting of bridging loans for development purposes on the back of the Carillion liquidation that’s hit the headlines.

Lenders may now be looking at other projects a company has to check any links with the failed Carillion, and what impact it could have on the company or its suppliers.

But despite these areas of the bridging market that have served lenders well over the years in possible decline, bridging can and will find new avenues to grow.

There are still lenders out there who are refining their products for Houses in Multiple Occupation (HMOs), portfolios and commercial properties, but also non-property purposes such as business development and cash flow injections.

This can lead to many more opportunities for bridging to have another good year, particularly with product innovation and diversification leading the way.

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