Is the future bright or bleak for bridging?

Is the future bright or bleak for bridging?


In this panic-stricken climate of doom and gloom, the effects of the credit crunch on the bridging sector have been surprisingly difficult to judge, with conflicting stories coming in from all angles. 

Some bridging companies claim it is business as usual, whilst the results of the latest NACFB survey report that levels of business from short term finance members are down by 25.18%. Residential bridgers meanwhile, have spoken about the numerous opportunities arising from the enduring economic turmoil.


So is the bridging sector benefiting from the banking difficulties or is it being as adversely affected as the rest of the financial world?


The NACFB has said that the all important exit strategy, which good bridging loan companies rely on, is becoming unstable as commercial mortgage lenders retract certain products and become more reluctant to lend. This leaves bridging lenders and their clients without that exit and as a result, less bridging written by commercial brokers.


Whilst conditions for commercial bridging are unfavourable here, overseas opportunities appear to be ample, according to Bridging Finance. The Manchester based company has recorded a recent rise in people looking for short term funding to buy property abroad where prices and living costs are attractively low.


As commercial lending is down, due to funding for property developments being in decline, bridging finance for residential lending would appear to be on the increase. This difference may somewhat explain the discrepancy in reports.


Residential bridging being on the rise could be put down to seasoned investors with plenty of cash to play with and an interest in exploiting current economic conditions. The “predatory buyers” as they have been labelled, often turn to short term financing to hurry deals through when mortgage lenders hesitate.


Eugene Esterkin, CEO of Affirmative Finance, has said that the mixed reports reflect the general uncertainty of the market. “Both sides are accurate,” he commented, “there are some bridging companies that are doing well and growing, others are playing it safe, whilst a few are actively trying to reduce exposure or are going out of business due to lack of money and constraints placed on them by lenders. It all depends on whether those who fund the bridging companies allow them to take risks in the market place.” Summing up, Mr Esterkin stated that he had “never seen the market so fragmented in opinion.” 


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