Bridging market

Is there room for more bridging lenders?




With the UK bridging market seeing more and more lenders enter the space, key industry professionals have argued whether it offers brokers greater choice or confusion.

A recent poll conducted by Bridging & Commercial found that a staggering 74% of respondents felt there were too many bridging lenders entering the market.

Despite this, new lenders are still launching. But is this positively affecting the market?

Paresh Raja, CEO of Market Financial Solutions, believed that new lenders added “vibrancy” to the bridging market.

“Competition makes us look at our processes, practices and rates to see if we can find a better way to serve the borrower.  

“[I] am a great believer [that] there is plenty for all, especially as the requirement for specialist finance is predicted to grow due to greater awareness and demand in the market.

“A new lender would have to have an innovative USP to attract new business.

“As well as intermediary incentives, you would also look to make sure that the broker is confident that the deal can seamlessly be placed, therefore, an excellent service is paramount to provide the client [with] access to fast finance.

“In-depth knowledge of the underwriters [and] keeping the process [as] simple as possible will also give brokers more confidence in the bridging market.”

D’mitri Zaprzala, head of sales at Octopus Property, said the challenge for brokers was how to distinguish between different lenders.

“More than ever, they need to ensure they have a robust understanding of both a lender’s source and depth of funding, as well as product type, so that they are securing borrowers the right type of financing.

“The more successful lenders will have a diverse range of funding sources – perhaps with a combination of retail and institutional money – or with separate commercial and residential credit lines, [so] that they can consistently deliver on their promises when lending.”

Survival

James Bloom, managing director of short-term lending at Masthaven, stated there was no question that there would be new entrants into the bridging space.

“Given the number of specialists with low costs of funding already in this sector, I think it may be difficult for a new entrant to compete on price.

“They would either need to offer a niche product or go up the risk curve to try to capture the market.

“Whether this is actually a good time to do this remains to be seen, but it may be a dangerous way to try to get market share.

“Because bridging is very much a service-led industry, I think technology and slicker processes can help new entrants grab a foothold in order to ultimately gain traction in the market.”

Christopher Adamou, managing director at Lendhub, said new entrants meant an increase in the number of different products available to borrowers, better service levels and more competitive pricing for borrowers.

“Both existing lenders and new entrants need to be forward thinking and innovative to survive.

“A new lender needs to provide the trust and comfort to brokers that its promises will be delivered.

"Relationships are key!"

Competition

Alan Smith, CEO at VATBRIDGE, added that while the bridging market was becoming increasingly competitive with new entrants, it has impacted on existing bridging lenders.

“…Over the last 12 months, we have seen lenders reducing headline rates and increasing LTVs [in] an attempt to increase – or just maintain – market share.

“From the borrower’s perspective, competition can only have a positive effect, continuing to establish the bridging market [as] a mainstream funding solution.

“It is a given that to win business from brokers, you must have market presence, a competitive product and excellent service capability – oh, and I almost forgot – the introductory fees.”

Liam Brooke, co-founder and director at Lendy, added: “As a principle, we welcome competition, as it keeps incumbents on their toes and can often inject new ideas and thinking that disrupts the status quo.”

Liam said that successful industries – however new – would always attract new firms.

“And their affect is normally to drive down costs and potentially decrease profitability for other firms in the industry.


Liam Brooke, co-founder and director at Lendy

“For this to happen, however, new lenders will need to offer value add, either on price, product or service, or a combination of all three.

“And they'll need to grow scale very quickly, as profits will only come through owning sizeable market share and a number of links in the value chain.”

Improving Standards

Jonathan Sealey, CEO at Hope Capital, explained that diversity and competition were good for any market.

“It’s what pushes us all and makes us strive to be the best.


Jonathan Sealey, CEO at Hope Capital

“The only negative would be if the newcomers entering the market are not up to scratch and bring inferior products or service.

“So much has been done to improve the bridging and short-term lending market [that] we can’t afford to have lenders coming into it that don’t work to the same standards.”

Attracting brokers

Mark Dyason, managing director at Thistle Finance, believed that new lenders would need to offer products with attractive criteria and competitive rates to attract business from brokers.

“Sadly, of course, this is easier said than done.

“In short, even if you’re focusing on a more vanilla loan category, you still need to know your way around the bridging market and have the financial strength and in-house expertise to make an impact.

“Launching a bridging lender like many others already out there doesn’t mean you can’t turn a profit, but it does put the pressure on and can squeeze your margins if you are having to constantly lower rates to stay competitive.


Mark Dyason, managing director at Thistle Finance

“Short of Google or Facebook entering the bridging space and blowing it apart, which – let’s face it – is pretty unlikely, a new lender is going to have to do something pretty spectacular to really stand out in the current market.

“There are a lot of established and highly experienced specialist lenders out there that have pretty much everything covered.”

 

 

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