The market is definitely getting more competitive. There are more people looking to enter bridging from both ends of the spectrum, either really big players such as Aldermore, who are successful in the mainstream mortgage market, and a lot of smaller players, many of whom fall under the radar.
As a result there is a growing amount of competition for business from brokers. Unlike in the mainstream market there is no shortage of funds or people wanting to lend, as a result rates are getting lower and more competitive and I expect that trend to continue throughout the year, with average rates getting maybe a couple of percentage points cheaper by the end of the year.
Although not everybody competes for new business on rates, for Hope Capital for example it’s all about service and this is the area we think we can complete most effectively. Because we are a smaller firm we can offer an extremely high level of service, be bespoke and turn things around very quickly in a way that some bigger firms may not be able to do.
Another area to look out for this year is broker incentives, in the form of raised procuration fees or other offers, as every lender competes for business from a relatively small number of brokers. We sometimes run offers where for a period of time the proc fee we offer is higher, other lenders run offers of different sorts and as competition increases this is only likely to become more popular.
In terms of the wider market, more and more lenders appear to be diversifying into secured loans and other medium term loans, but we feel that while this is a growing market it is a distraction away from genuinely short term loans and the solutions that they provide, undoubtedly more people will look to capitalise on this lengthening loan-term area though.
While the MMR does not, in theory, affect unregulated lenders which is a large part of the bridging community, it is still bound to have an effect on the way all of us does business, even if not straight away. It sets a rigorous standard for advice to be offered on almost every loan and it will become imperative for everybody offering advice to document what they are recommending and why; as a result this is likely to change what is seen as the norm and I expect to see it work its way into unregulated business over the next year or two.
This may be further impacted when consumer credit firms also come under the FCA’s regulatory banner, it may only be a matter of time before all loans are regulated in the same way, especially if the European Directive comes in under its current form which at the moment says that second charge loans will need to be treated in the same way as a first charge. If this does happen however, it would be very helpful, for smaller firms especially if the red tape around being regulated was simplified. There are many smaller firms who would be happy to be regulated and who already operate along regulatory principles, but the cost and the red tape involved in being regulated makes it prohibitive.
The nature of bridging and the firms in it however means that by its very nature it is always going to be diverse with different lenders working in different ways to offer different financial solutions. Bridging and short term loans have filled a gap in the market left by the mainstream lenders and that only looks set to continue. As a larger number of people become familiar with bridging and the quick and flexible solutions that it provides I think that demand will continue to grow.
As bridging increasingly becomes more respectable, this will also have a positive impact. Consumer confidence is growing and I think that this year particularly people will look to capitalise on the opportunities that property presents, whether to extend existing properties, grow property portfolios or turning to property to fund business investments.
Leave a comment