This month, Specialist Lending Solutions asked its panel: How do you see the current state of the bridging market and can all the new entrants survive and make an impact?
Lee Carling, head of bridging at Loans Warehouse suspects only those who innovate will survive in the long term.
Phil Jay, director at Complete FS, notes that it is a healthy market but too many lenders are stuck in the 20th century.
Dave Pinnington, director of intermediary relations at Finance 4 Business, believes there is room for new entrants, but lenders will need to up their game.
This time last year I was handed a list of lenders actively lending short term finance. I was amazed that the list had 83 names on it.
Surely that number cannot be sustainable. Especially when most of the lenders on the list were offering the same model and rates and did not stand out from the crowd in any way.
Mainstream lenders like United Trust Bank, Octopus and Precise continue to grow, utilising the availability of cheap and plentiful funds.
For me it’s apparent that service is key and niche lenders such as Octane, Kuflink, Tuscan and Home Finance Bridging Solutions are thriving because they are setting the standards.
They deliver a great service and as a broker that’s what we demand.
It is a service that should be the norm with swift decision making you can trust, responsive business development managers and underwriters.
They also have a positive outlook where you feel a lender is looking to lend, yet when they can’t, they are honest and explain their rational.
The new entrants we’re working with may be new in branding but traditional with their service standards.
A common-sense approach rather than a tick box exercise which too many lenders become when they enjoy some success. Niche and responsive will survive.
We’re still seeing a few more short-term lenders coming to market and since 2012 we’ve significantly upped our lender panel both in terms of specialist and bridging finance lenders.
Some might say that they are not all going to survive, particularly in the bridging world as rates become more competitive and the funders inevitably earn less.
It is interesting that some long-term lenders are moving into the short-term market and vice versa, making it a very healthy market, which should benefit the broker and customer.
But it is important for these lenders to rely on their strengths and what they do best.
There are significant differentiators that mean some bridging lenders will stay around for a long time, where others will struggle to maintain a viable business model.
Given the rate is competitive, lenders need to offer technology to improve their process – such as automated valuation models and quicker legal work. Too many lenders are stuck in the 20th century.
This month we completed a bridging loan in three working days and while this is not the norm, lenders should work towards offering a much quicker customer journey.
The outlook for bridging has been good, very competitive and I think it’ll be a good year.
Dave Pinnington, director of intermediary relations at Finance 4 Business
The demand for finance in the development and commercial sector along with the changes in buy-to-let lending are driving growth in the bridging sector at present and there are plenty of opportunities for lenders to capitalise on.
As such, there is certainly room for new entrants. However, as with any market, greater competition means lenders will need to up their game in order to win business.
We’re seeing this from the likes of Octane with its ‘no product’ bespoke approach and this push for lenders to think outside the box and bring more to the table can only be a good thing for borrowers.
What will drive the market further will be greater broker engagement with bridging finance.
There are obviously occasions when the need for a bridging loan is clear and, indeed, clients will come in search of a short term product but greater innovation over the years has meant bridging has become a more versatile product and there are many more creative ways in which it can be used. Commercial bridging, bridge to let, bridge to sell and light refurbishment loans are all hugely useful products.
If more brokers embrace the product – and indeed the specialist sector as a whole – we could see the bridging market scale new heights this year.