Like every other year, I overindulged and have the best of intentions to clean-up my act by attempting to drink less alcohol, eat less bad food and exercise. Unfortunately, I still have a significant amount of chocolates, biscuits and booze left over from Christmas that needs to go first, before I stand a chance of succeeding. I have therefore postponed the start date of my new ‘healthier’ living regime until Monday 5th January. This fits in nicely with my plans for the weekend, as my mate’s band is playing tonight and I didn’t fancy tackling it sober and after all – Monday 5th of January is the first ‘official’ working day of the New Year for most.
So what do I think 2015 has in store for the Bridging Industry? Well, I am pretty certain that we will continue to see an increase in the uptake of short-term finance, as it has settled alongside the mainstream as a viable, alternative source of funding for serious property professionals and home-movers alike. I don’t think that those in the regulated, prime bridging space who have previously competed for the industry’s cheapest bridging rates (Precise vs United Trust Bank) should lower rates much more. There is some scope for others in this space (ABC, Masthaven, Capital Bridging) to reduce margins slightly if they want a bigger slice of market share, although there will be constraints as to how much they can afford to be competitive to win business, as they are governed by cost of funds - how they are funded (cost of wholesale bank funding or investor’s expectations on return on capital invested).
I don’t believe the industry needs to reduce rates much further, as there needs to be a clear differentiator between higher-risk bridging funding and long-term mortgage lending. Plus their profit return on capital is earned over a much shorter period – typically 6 to 12 months, verses typically 3 – 7 years on a mortgage term loan.
I predict some further product innovation, although in reality how much more innovative can the bridging sector be? It has pretty much led the way in the post credit-crunch World.
We will certainly see more lenders enter the regulated bridging space and perhaps some other smaller lenders leave this space, as the cost of regulation is just too much for them.
The Crowd-Funding / Peer to Peer market will continue to thrive rapidly, although 2015 may see the first investors and lenders catching a cold on some high-risk loans. I hope I am wrong, but I fear not.
So will the unsecured business cash-flow companies, judging by the number of new lenders exhibiting at the various trade shows towards the end of 2014.
Anyway, that’s it from me for now. Wishing everyone a very prosperous 2015 in your businesses.
By Kit Thompson, Brightstar
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