2017 was a momentous year for bridging, with annual lending breaking through the £3billion figure for the first time. But before we get carried away, we need to bear in mind this is equivalent to only around one ninetieth of the residential mortgage market.
By its very nature, bridging is a niche lending market – although it has shown a remarkable ability to adapt and thrive, providing solutions to new market needs in recent years. For property refurbishment in particular, the options now available to developers are far more widespread and competitive.
Who in the mainstream market, would have thought a decade or so ago that bridging would have proved such a socially useful form of lending, enabling empty and neglected property to be brought back into use, and supporting entrepreneurship?
Yet here we are, and I am excited about where the future might lead us.
Gone are the days when the only awareness that people had of bridging finance was in managing the mismatch of timing in the sale and acquisition of two disparate assets. Now, there is a growing recognition that short term finance can bridge not just a timing gap, but other gaps as well – the risk appetite gap, for example (especially as far as big banks are concerned following the global financial crisis).
Occasionally, though, I hear rumblings of concern that the bridging market is growing too fast, and risks stoking problems rather than solving them. I also hear concern about the fact that too few intermediaries operate across boundaries – brokering both short term and long term borrowing solutions for their clients.
On the first point, I see little evidence of difficulty. If anything, short term lenders are more acutely risk aware than their long term counterparts, as the impact will hit them sooner and harder if their customer cannot repay as planned. As long as sensible due diligence is conducted and the client has a clear exit route, if the demand is there it makes sense to meet it.
As for the second point, I have a degree of sympathy. There are still only a relatively small number of brokers who engage with bridging, with few mainstream brokers considering this as an option – although this number is growing. Holistic advice, and access to the widest possible range of solutions, must always make sense from the client perspective. One of the benefits of being part of a growing market is the increasing likelihood of forming part of the suite of options on offer. I’m sure it is only a matter of time until more brokers realise it makes sense to look at all options and this in turn will lead to the further growth of the bridging market
As we look ahead, there will be an increasingly fuzzy boundary between products, yet an increasingly clear expectation on the part of clients that their advisers will have all available options at their fingertips. It’s clear that bridging has now earned its place among those options – and that can only be a good thing.