2014 brought a bumper year for the bridging industry with long-term mortgage interest rates at a record low, 90 per cent of LTV ten year fixes at 3.44 per cent and inflation below 1 per cent.

Now, the Association of Short Term Lenders is looking to the future.

The ASTL sees some forthcoming obstacles in the form of slowing house price rises and the base rate not looking set to rise until the third quarter, not to mention the possible effects of mansion tax and stamp duty on the market.

Benson Hersch, CEO of the ASTL, thinks that in Scotland, changes to the Stamp Duty Land Tax will only take effect from April 2015 despite being affected by the same stamp duty changes as the rest of the UK until then.

“This may well lead to a short-term boom in the sale of properties at prices between £250,000 and £1 million as the Scottish changes will leave people worse off than the stamp duty changes in the rest of the UK,” said Benson.

Despite falling oil prices, it looks like the potential increase in real wages could trigger pressure to increase interest rates.

“No-one really knows how this will affect the UK economy, or how fragile the recovery is,” Benson says.

“The country is still deeply in debt and there is no real sign, outside of politicians’ wish lists, that this will change markedly in 2015.”

Benson believes the year will be divided into two unequal halves, leading up to the uncertainty of the elections in May and the prospect of higher interest rates, which could lead to people reducing their consumer spending.

“For those who are highly geared and do not have fixed interest rates, the prospect of higher payments is very daunting,” he says.

“The housing market is driven by consumer sentiment as much as logic, so it is impossible to judge whether prices are likely to fall. It’s unlikely, unless there is a more general economic downturn, that any fall will be major however, as demand for housing continues to outstrip supply.”

Benson also believes that new rules to accommodate the EU Mortgage Credit Directive will lead to higher costs and impacts on lenders’ margins.

“UK banks have squeezed through the most recent stress tests but with lending to SMEs still very low it looks like businesses will still need to use alternative financing methods, including bridging, to get the funding they need,” Benson says.   

“This bodes well for bridging lenders, although competition will definitely increase so I do not expect bridging lending rates to increase, even if there is a rise in base rate. No doubt the challenger banks will help to keep rates low, with several active in the bridging space.”

Benson assures that the ASTL will continue to play its part in increasing the profile of its members, and looks forward to a good year, with new members and an exciting conference planned for October.

“Overall, my view is that the first quarter of 2015 will be good for the bridging industry.   After that, the ride may be a little bumpy, but firms with good underwriting and excellent service levels should still prosper. “

Attributed to Benson Hersch CEO of ASTL