At the same time there has been a huge number of new lender entrants to the market, the competition has brought rates down, and, led by the ASTL, standards have risen.
What this notable growth has done however is very much bring the bridging industry to the attention of the FCA. While most unregulated loans escaped the spotlight of the MMR and even the Mortgage Credit Directive this time around, looking towards the future it is unlikely that bridging, and many other currently unregulated loans, will continue to be so further down the line.
If we could take a crystal ball and look ahead five years I expect to see a market where regulation is in place for many more loan types and bridging is likely to be one of them. What that regulation looks like remains to be seen, but we all have a part to play in shaping this, led by our trade bodies, both Association of Short Term Lenders and the AOBP. I think this will be in place within the next two years.
As a result more lenders will need to be regulated; this does raise the question about the number of private individuals who lend money for projects, completely underneath the radar. There are a number of ultra high net worth individuals or families that lend on a couple of deals a year that are never recorded anywhere. I doubt that any amount of regulation will stop this but it will increase the risk of people defaulting on non-regulated loans. There is also a market of very experienced property investors for whom regulation will be an unnecessary burden, and any new regulation would need to take this into account. It seems improbable that bridging will continue to escape all regulation for much longer however.
In the short term I think that more lenders will enter the bridging market; as it continues to grow there will be more people looking to take advantage of the growth and the profits to be made. I don’t expect this to include the mainstream banks however; in the last four years I have not seen the banks show any willingness to open their books again to short term lending or loans for development - or even for businesses who need access to short term money, many have found it incredibly difficult to get money from banks over the past few years, even when secured on their property and I don’t expect that to change.
As the market becomes more regulated however, the number of lenders could well get fewer and there may even be an amount of consolidation in the bridging market, while no doubt a few will fall by the wayside. I expect standards to continue to rise and in several years the short term lending market will resemble the mainstream market much more.
The spectre of regulation makes it more important than ever to build a brand and a sustainable business model that will weather whatever the future brings. One thing is for sure, I think there will continue to be a place in the market for bridging, where people can take out short term loans secured on their property for a whole variety of purposes.
