I recently attended the ASTL annual AGM at Painter’s Hall, London and one of the ‘hot topics’ of the day was listening to Lynda Blackwell from the FCA give her views on the bridging market. Some interesting views were expressed, some of which I agree with and some which I do not.
For starters, there was a comment about the bridging sector ‘booming’ since MMR. This would imply in some way that as a direct result of increased regulation and tighter rules around affordability checks by lenders, that bridging business has increased. I disagree with this comment.
The increase in bridging lending is due to availability of funding, appetite to lend, less restrictive criteria and a buoyant housing market, with house prices on the rise, all coupled with a lack of liquidity from mainstream lenders. Not because brokers are pushing borrowers in to bridging loans, because mortgages are harder to obtain. Yes, bridging is booming and business levels grow year on year, but in my opinion, this is not as a result of borrowers seeking to take bridging as an alternative to mortgage term lending, believing in some way it is somehow ‘easier’ to get a bridging loan.
Bridging loans are cheaper now than they have ever been. Fact. There is more competition in the sector. Fact. More bridging lenders have ahead of FCA requirements to regulate all secured lending, got themselves regulated. Just this week, Capital Bridging announced they are now authorised for regulated bridging loans, previously only being able to offer non-regulated loans. They join an ever growing list of regulated bridging lenders, including Precise Mortgages, United Trust Bank, Dragonfly, Masthaven, Affirmative, Bridgebank Capital and Mayfair Bridging (to name a few).
Whilst the nature of bridging finance is ‘higher risk’ than mortgages, due to the higher rates and shorter terms (max 12 months) involved, all of the lenders I have mentioned that offer regulated bridging loans are ethical and fully embrace the TCF principles.
I think the regulator needs to be aware that there are regulated lenders and non-regulated lenders. They are two very different types of bridging finance. Ultimately, I believe that all secured lending, whether it be mortgages, secured loans or bridging finance, should be regulated - and one day I am sure this will be the case.
However, in the meantime, it is not fair or accurate to tarnish the whole bridging industry with the same brush as the likes of payday loans etc. Also, the bridging lenders who are not FCA authorised and do not offer regulated loans are in no way ‘worse’ than their regulated counterparts. They just operate in a different sector. We deal with both regulated and non-regulated lenders, whom deal with clients in a fair, transparent way.
There is a distinct difference between a professional property investor requiring funds to renovate an investment property (non-regulated), compared to a couple who are looking to purchase a new home, without having first sold their existing home (regulated).
Their needs for finance are very different and the rates charged in both are reflective of the ‘price for risk’ strategy most lenders sensibly apply to their loan underwriting.
On the flip-side, having previously not been in favour of a self-imposed bridging qualification (when brought up by AOBP Chairman, Rob Jupp, early this year), it was nice to see the FCA do a U-turn and confirm they would be “very happy with a self-imposed bridging qualification, to improve standards in the industry.” I for one certainly support this and I look forward to being one of the first in the industry to obtain the qualification as soon as it is available.
Leave a comment