Mortgage Strategy

Just how viable the bridging market is, was brought home to me having read the latest ASTL data for the quarter ending 30 June 2014. Measured against the same period in 2013, the market has actually doubled as far as their members are concerned. Much of this new business is being driven by the increasingly active development market, as well as activity from landlords looking to refurbish existing property in the search for higher rents and therefore greater returns. Here at Complete FS, we are seeing a high volume of new business from both these sources.

Having patted ourselves on the back though, it would be wise to consider the longer term and what the industry can expect in the next few years. Bridging is under as much scrutiny as the rest of the lending industry but I am confident that any lenders, particularly the ones we deal with, who expect to be doing business in the medium and long term, are not taking their responsibilities and obligations lightly as part of a fully regulated short term lending market.

I have no doubt that the continued transition will result in some lenders leaving the market. Frankly, they won’t be missed. What we will see is a further polarisation between those lenders who wish to be fully regulated and those that will be only dealing with non-regulated business. I think the question that lenders need to answer is the response from the intermediary community as to what inference they place on the magic word ‘regulated’. No doubt some lenders will seek to trumpet that regulated is good and non-regulated is bad. Being regulated does not confer the right to suggest to brokers and their clients that the offering is automatically superior to that of a non regulated lender.

I am in no doubt there is a need for non regulated lenders in a development market where professionals require access to funds but do not need to have their hands held. However, post-MMR brokers will now be able to differentiate between lenders on behalf on the type of clients that they represent.

The ASTL conference which took place this month with participation by the FCA, was clearly a successful event and while much of the comment has been on the topics and the level of cooperation between industry and regulatory bodies, one of the striking aspects for me was the way in which the industry, particularly the lenders, through the ASTL, are demonstrating a united front. This was so lacking and is such a contrast from only a few years ago.

The FCA’s Lynda Blackwell was the star attraction for obvious reasons and much of what she talked about made a good deal of sense. Why anybody would not latch onto the need for a formal qualification in bridging as an adjunct to the CeMap qualification or as a stand alone, must be clearly living in the dark ages. Those of us who have been ‘doing’ bridging since Noah was a boy also have no reason to harrumph about being asked to qualify. At the end of the day, it is about professionalism and the confidence it gives present and future customers in a forward looking and progressive industry. So bring it on, I say!

However, after Linda Blackwell’s implication that bridging was growing due to it granting an ‘easier’ entry to funding for clients unable to access normal funding, I do not see that trend in my analysis of the business we are writing. The idea that there are brokers bemoaning the perceived restrictions on first charge lending as evidenced by the MMR, cheering each other up by piling their clients into completely inappropriate bridging deals is likely to become one of those urban legends. The fact that Lynda Blackwell made those remarks though suggests that there is a more than just perception at work here and as an industry we need to work hard to prove that bridging is not the dumping ground for clients who cannot get legitimate funding elsewhere. The evidence I have and those of many of contemporaries in the packaging and distributor sector does not support Ms Blackwell’s contention. The concern for me is that without a change of mind, the regulator will feel compelled to action, which might in fact end up as overkill. Increasing the professionalism of intermediary and lender has got to be the way forward. Bridging is not lending of last resort and our continued efforts to professionalise the whole industry cannot come a moment too soon.