The educational afternoon was based at The Courthouse Hotel in Soho and was supported by Allica Bank, Alternative Bridging Corporation, Colenko, Fleet Mortgages, Hope Capital, Market Financial Solutions (MFS), Sopra Banking Software, United Trust Bank (UTB), and YBS Commercial Mortgages.

The bridging panel was chaired by Medianett Publishing’s managing director Beth Fisher, and the panellists included Mark Marlow, head of sales at Colenko; Imogen Williams, regional sales manager for the south-west region at MFS; Chris Whitney, head of specialist lending at Enness; Charlie Gregory, BDM for the London and south regions at Hope Capital and Sundeep Patel, director of bridging at UTB.

A reoccurring theme of the discussion was the idea of re-bridging, with Chris saying it often has a misconception attached to it: “We are seeing a lot of re-bridges, but I think it's a bit of a myth that a re-bridge is automatically a bad thing or something's gone wrong.”

He cited re-bridging as being another avenue to a successful project, claiming that where an opportunity has changed — quite often for the better — there's a more profitable route that's being uncovered. 

Imogen agreed that re-bridging is not simply an indicator of a troubled project: “We don't necessarily view it as a bad thing as long as there's a solid explanation, and, again, it comes back to a solid exit; things happen, the market changes, sometimes people can't exit.”

“Often what you see now is a shift from people trying to exit via refinance to changing their exit to sale,” she continued.

She explained how high-value single assets or big portfolios “are going to take a fair amount of time to sell” and therefore another six to 12 months is sometimes needed.

Panellists also spoke of the importance of brokers and lenders educating their clients in the realistic project timeframes and how to avoid unnecessary re-bridges.

“We see many situations where they didn't have a long enough term on the facility, and that can fall down to the brokers and the lenders,” said Charlie.

He explained how brokers need to question a client if they think they can buy, refurbish and sell a property within six months.

“Brokers and lenders alike should be pushing back saying this is not enough time. It’s not responsible to say you can do it, because most of the time they can't.”

Mark also noted that while lenders are happy to look into re-bridging cases — due to delays in a project or issues that can affect even the most experienced developers — re-bridges are not always appropriate.

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“You've got instances where the borrowers have got schemes that have been mismanaged and  they've run into difficulties, and putting them onto another bridge is probably not the right thing to do.”

This scrutiny of applications was linked with the recent increase in foreclosures that the EY Bridging Market Survey revealed.

Of those surveyed, 58% expected to see a further increase in foreclosures, while 33% had already seen the rise this year, compared with only 4% last year.

Lenders need to perform their due diligence when reviewing cases, said Mark, who pointed out the need to have more reliable forms of non-primary exit. 

“So taking all the factors into the equation when making these decisions — especially when you're looking at ICRs and specialist BTL if you're relying on that as your exit as a secondary to sale, what fits outside of that?”

He summarised, “You can't just look at the primary asset now. You need to look at the wider picture.”

The rise in interest rates and market volatility also gave reason for added cautiousness, said Sundeep who cited the false summit of bad market conditions set by Lizz Truss’ mini-budget, which only took a turn for the worse.

“As a lender, we assess our risk almost weekly at the moment because that's the prudent thing to do to make sure what we offer is correct and suits the market.”

Imogen also noted the impact of the rapid rise in interest rates, saying that a few years ago when it was standard at around 1.5%, people getting residential or BTL loans were being stress tested at 5-5.5%, but now the residential market is looking at rates of 6%.
 

“That increase has happened very quickly — I think these sorts of stats are inevitable really in such a short space of time with rates increasing so rapidly.”

Along with the rise in re-bridging, expected foreclosures and interest rates, some of the panel noted the increased speed in which lenders were willing to call in administrators.

Chris described how some lenders used to be fine with extending loans and “kicking that can down the road”. Now he’s seeing administrators being called in very quickly.

By efficient communication between all parties, the panel agreed that these elements can be avoided, but when borrowers don’t talk with lenders, it leaves them with little choice.

“I think it always depends on how willing the client is to work with the lender; if they bury their head in the sand or promise things and then don't deliver, lenders have no option,” said Imogen.

“When you don't hear anything at all, you automatically assume the worst, so unfortunately that is sometimes why lenders take further action,” added Charlie.

The panel were also in agreement that the solution was clear cut: if the borrower keeps the communication strong and gives reasons for the delays, they should hopefully have lenders that want to work with them.