Charles Haresnape: The importance of playing the long game

The bridging market in the UK continues to perform extremely strongly with the latest West One Bridging Loan Index showing that gross bridging lending increased by 21.8 per cent year-on-year in the 12 months to 1 September.

In those 12 months, a record £2.2 billion in loans were advanced, up from £1.8 billion in the previous year. If the market continues to expand at this pace, it is likely that soon there will be more bridges than rivers to cross.

However, there is an additional aspect to the bridging market that is important to consider, that of having a long-term plan and not just using it as a quick fix.

Earlier this month, Elfyn Llwyd, MP for Dwyfor Meirionnydd described the situation that two of his constituents found themselves in during a debate at Westminster. In what he said was ‘one of the worst scandals’ he had seen, his constituents ‘were forced into a succession of short-term bridging loans of between three and six months’ resulting in ‘a vicious spiral of unnecessary debt over which they had no control’, leaving them in dire financial straits.

While legislative protection is one method of protecting customers, there lies with lenders an equally important responsibility to ensure that bridging finance remains just that, a bridge to another product, and that there is a proper understanding that a bridging loan is not a replacement for a traditional loan.

This is a crucial point, especially given the expansion the bridging market has seen in the last year. With a recent survey showing that two thirds (66 per cent) of brokers expect the bridging and short-term secured finance market to expand over the next three years, it is important that those coming into the industry are working in the best interests of their clients.

There are several ways this can be achieved, the main one being to have a long-term plan in place. For example, at Aldermore we offer a bridge-to-term product to ensure that a robust plan and long-term support are in place alongside the initial bridging finance.

While the turnaround time for a bridging loan tends to be fairly tight, it is essential that lenders check that a customer is aware of the higher payment obligations of a bridging loan, and that outside of the initial affordability, they have a clear idea of what their options are for the future. Without a set plan, unexpected costs elsewhere can have a knock-on effect on the affordability of the bridging loan, which can lead to a host of problems.

In a nutshell, being upfront with a customer, as well as transparent about the demands of bridging finance, can go a long way towards helping a customer make the right decision for them, and being on hand to answer any questions that come up should minimise the risks of a costly mistake.

Pictured: Charles Haresnape with colleague Lauren Dolezel