Before the election, there was a real concern about the mansion tax if Labour got into power. This could have had a very detrimental effect not only on high end family homes but properties bought for development and HMOs. As these are prime bridging properties this could have had a significant effect on bridging lending.
The fact that we no longer have to deal with that means that we can continue very much as we were with an upward growth curve. Over the past few years bridging lending has established its place alongside mainstream lending as a valuable solution for the many people who need a different sort of borrowing solution, those who need it quickly and over a short time period. It also takes care of the higher risk lending that mainstream lenders don’t want to touch.
The credit crunch in some respects did the industry a favour as it reset the balance. Before then lending had got somewhat out of control; the popular perception was that house prices would go up forever and many lenders relaxed the checks and balances that they had traditionally carried out. As a result the credit crunch brought a sanity check, it also weeded out all the fly-by-night players in the industry just to make a quick buck. The only people that survived were people who were very serious about lending and had the proper procedures in place and who could cope with the tougher lending regime.
This was also good for bridging because as the high street lenders reigned in and focused very much on vanilla mortgages for squeaky clean borrowers it left a gap in the market for more niche lending. Resultantly, as savings rates dropped and securitisation all but disappeared the funding dried up for mainstream lending. In areas such as bridging on the other hand, there has been a considerable influx of new lenders. Not only established lenders but high net worth individuals look to make a better rate of return.
Unlike the mainstream market there is more funding in bridging lending now than there are borrowers needing it. The supply of funds way exceeds the amount of lending. The other good news is that the competition in this area means that the cost of funds has come down and continues to fall, especially amongst the bigger lenders.
Despite bridging consistently outstripping the rest of the market, it is unlikely that mainstream lenders will move back into this area. As a result both the rest of this year and next year look like they will be very good years for bridging, with steady sustainable growth.
The thing that will really increase the size of the market however is a growing awareness amongst brokers of the role that bridging plays and how it can help their customers. Once there is proper understanding amongst mainstream mortgage brokers the market will grow exponentially.
There is a definite need for the services that bridging can provide but too many people and brokers are unaware of when a bridging loan is absolutely the right decision. Too many brokers still think of a bridging loan as expensive and difficult, without realising that there are companies such as Brightstar who can hugely simplify the process for them. Ultimately bridging can be used for many people who have unmortgageable property because it doesn’t fit with the norm, while it can help others capitalise on opportunities that wouldn’t otherwise be available for them.