Martin's Mailbox: The future's bright, the future's bridging

Martin's Mailbox: The future's bright, the future's bridging




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I make no apologies for returning to the subject of bank lending – or lack of it – as it’s at the very heart of what’s helping to make bridging one of the few lending success stories. With the banks in retreat, it’s the opportunity and ability to lend that is allowing bridging providers to ramp up their presence, scale and profitability. 


Last week, I commented on the Funding for Lending Scheme (FLS) and how it is failing to achieve early results for SMEs looking to borrow at affordable rates. I said then that the FLS looked likely to be of more benefit to mortgage customers than SMEs, but it appears I may have been wrong.


A national newspaper reported this past weekend that households are being hit by a ‘double whammy’ of shrinking saving rates and rising mortgage costs. Despite having access to cheap money courtesy of the FLS, banks and building societies are increasing their mortgage rates. With less reliance on customer deposits for lending capital, they are simultaneously slashing interest payments for their, often loyal, saving customers.  


I explained in my previous blog how borrowing spreads are rising, instead of falling, for SMEs. A similar picture is emerging for private customers. In the quarter ended 30th September, the cost of an average 2-year fixed mortgage with a 10 per cent deposit increased from 5.83 per cent to 5.86 per cent. Standard variable rates also rose to their highest level since early 2009 – from 4.24 per cent to 4.28 per cent. Meanwhile, fixed-rate savings fell from an average of 2.62 per cent to 2.47 per cent - their lowest since August 2010.


The banks, of course, have plenty of clever explanations for these disparities. Whether they make any sense to the borrowing public is another matter. While the actual figures may appear small, the effect on a population being hit by bad news from many angles – rising petrol prices, food inflation, energy price hikes – only adds to a feeling that the few are profiting from the woes of the many.


Now I admit it’s early days and the FLS may yet redeem itself. But the same hope cannot be extended to the European banking sector which remains mired in problems of its own making. An interesting little piece in City AM – a giveaway London newspaper – reported last week how banks are facing a ‘five-year struggle’ to deleverage their debts down to sustainable levels.


Based on a survey by a global accountancy firm, the banks identified a combination of regulatory tightening and liquidity constraints as the main drivers behind their deleveraging strategies. But in a signal admission, the banks said their efforts will have little impact on a debt mountain built up over many years of excess, and which even now threatens to sink forever the most vulnerable among their number.


The opportunities for enterprising bridgers are there for the taking. They depend, of course, on the means and ability to lend and a prevalence of exit routes, but as an alternative to the banks, we offer real and ready competition. It’s one reason why Omni Capital last week raised its maximum ‘rate card’ loan rate from £7.5 million to £25 million. It’s not just that we have the funds to do it, but that we recognise the increasing demand for higher value products from our brokers and their clients.


I’m delighted that so many brokers are reaching the same conclusion. We reported last week that one of newer broker partnerships has got off to a storming start. Arc & Co. – a Mayfair-based boutique consultancy – completed back-to-back, high value second charge bridging loans with us in September. Highly professional in their approach to specialist bridging, they are astute and accomplished at sourcing the type of high calibre customer summarily denied access to finance through the more traditional routes.


Elsewhere, and I make no apology for the plug, Swindon-based intermediary Niche Financial Solutions is holding a seminar for brokers interested in learning more about bridging and short-term lending. It takes place at the impressive Madjeski Stadium (home to Reading FC) on Thursday 18th October. Don’t be put off by the fact that I’m one of the presenters – I’ll be accompanied by my even-more-photogenic other half, Colin Sanders. More information is available from NFS’ website www.nichefs.co.uk 


I could go on but time and space won’t allow. Suffice to say it’s deeply encouraging to see initiatives of this type coming to the fore, especially when driven by forward-thinking intermediaries able to understand and grasp this unique opportunity. 


With apologies to the marketing department at Orange, the future really is bright… if you’re in bridging. 

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