Charles Haresnape: Intermediaries and lenders should work together

2014 was a strong year for the bridging industry with the latest figures from the Association of Short Term Lenders indicating a high level of growth.

The value of applications was up 97 per cent in the last quarter of 2014 compared to the same quarter a year before, while the value of bridging loans written was up by 47 per cent in the quarter and 63 per cent higher for the year from 2014 compared to 2013.

The beginning of 2015 has proved to be no less positive, with the West One Bridging Index indicating that almost £50 million worth of bridging lending is being approved each week.

As the market continues to grow and becomes more specialised, different trends are emerging as to what bridging loans are being used for.

For example, where a perception is that bridging loans are often taken out by individuals looking to move house or as a temporary measure when buying a property at auction, data from Q1 2015 shows that almost seven out of every ten (69 per cent) bridging loans were unregulated, indicating a high proportion are being used in a commercial context.

As the market continues to evolve and grow, the catch-all category of ‘bridging lending’ is likely to need to become more nuanced in order to accommodate the increasingly bespoke products now on offer, as well as differentiate between lenders according to the emphasis they place on different aspects of process and service provided.

For instance, in the example of someone who is using a bridging facility for a property purchase at auction, speed of completion is essential to avoid higher than necessary charges.

For Q1 of 2015, the average completion time for bridging lending was approximately 34 days, and lenders who have a reputation for faster completion will be preferable for those who are looking for a particular fast turnaround.

Alternatively, where bridging has a reputation as a very short term financing option, term times are on the rise, with the average term for Q1 at 11 months.

This is not to say that people should think of bridging finance as anything other than a short term option, and it should not be used as an alternative to a traditional mortgage.

There is a responsibility for lenders to be fully transparent with the costs associated when assessing the long-term options of a deal, and Aldermore, for example, offers a specialist bridge to term product to ensure the finance provided is sustainable.

As the market matures and product offerings become more diverse the perception that bridging finance are simply short terms loans paid off within 6 months will become out of date: intermediaries and lenders should work together to distinguish where products differ to ensure the best outcomes for customers.

By Charles Haresnape, Managing Director, Mortgages & Commercial Lending, Aldermore