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Aggregators a growing source of bridging clients – EY

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  • 09/04/2020
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Aggregators a growing source of bridging clients – EY
Bridging lenders are starting to see online aggregators as a genuine source of clients, however brokers remain the key focus for the market.

 

According to the EY UK Bridging Market Study, eight per cent of respondents cited aggregator websites as one of their top two channels for loan originations. No-one mentioned this area in the 2019 survey.

It appears its appeal remains a limited viable primary source for the moment with 59 per cent of respondents saying it was the least important channel.

This was reinforced by 60 per cent and 22 per cent choosing independent brokers and master brokers respectively as the most important channel for loan originations.

 

Covid-19 funding concerns

The EY survey collated responses from more than 50 UK bridging finance lenders and brokers with a combined bridging loan book size of £6.4bn and annual brokerage volumes in excess of £500m.

The survey was conducted before the coronavirus outbreak hit the UK and so does not make account of its impact.

However, EY warned that the coronavirus crisis could have ramifications on funding lines.

“From a debt financing perspective, the short-term impact of Covid-19 has seen many wholesale funding providers pause for new transactions to focus on supporting their existing lenders in the UK bridging market and understanding the potential impact from economic headwinds,” it said.

“Last year had seen a heightened interest from investment banks, particularly where the lender has reached, or is on a clear trajectory to reach significant scale.

“However, the long-term impact on whether wholesale funding providers retrench from the UK bridging market due to the challenges presented by the Covid-19 pandemic remains to be seen,” it added.

 

Economic uncertainty and defaults

Macroeconomic uncertainty and increasing numbers of defaults were seen to be the two biggest challenges expected to face the industry in 2020, with 73 per cent and 59 per cent suggesting so respectively.

Perhaps surprisingly, one in four respondents, the most of all options, saw rising defaults as the most important challenge.

This was a greater concern among smaller lenders and brokers; those with either a loan book size or annual brokerage volume of under £100m, EY noted.

And more than half of respondents also feared declining property values as one of the three main challenges for the year.

 

Continuing market competition

Last year was, given the survey results, a surprisingly competitive one in the bridging market.

In the 2019 edition only a third of respondents expected average monthly interest rates on loans to decrease over the next 12 months.

However on reflection, over two-thirds of respondents found the average monthly interest rate on loans had decreased during 2019, suggesting there was greater than expected rate compression in the market.

“This trend may again be observed this year, with 70 per cent of respondents citing competition as one of their top three business challenges in 2020 and over half expecting monthly interest rates to further decrease,” the report noted.

 

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