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16 | Bridging
New look of bridging
Alan Margolis, chief executive officer
of Cheval Property Finance plc,
sets out how the credit crunch
has impacted the bridging sector
L
ike the mortgage market in general, This undoubtedly has a lot to do
bridging has undergone something of with a much lower appetite for
a sea change over the past year-or-so. risk on the part of investors.
Today’s short-term finance market Alongside this, there has been a
looks radically different from the one surge in demand for the ‘classic
that prevailed pre-November 2008. bridge’, where a borrower secures
Beyond the obvious 180-degree about-turn a property with a bridge prior to
in the economy, there have been the well- selling their existing home. downsize and complete on their new smaller
publicised exits of a number of lenders (Link The surprising spike in house values that dream home before their current property is
being the most recent); the pulling back from has been evident over the past several months sold.
the market of other lenders to nurse existing has been caused largely by a real scarcity of lCapital raising – to assist with the completion
books; the scaling back of activity by other quality property. With many people opting to of a purchase before other “locked up” funds
bridging providers in line with the reduced sit tight in their existing homes and ride out become available.
availability of wholesale finance; and the the recession, there are far fewer ‘for sale’ signs
putting in place by all of a more conservative to be seen. Delivery
lending style. Good homes in nice areas are at a premium Undoubtedly, the profile of bridging is changing,
and, as always, cash is king. As a prospective but the high importance attached to service
Transformation purchaser, you do not stand much chance if delivery remains the same.
Alongside the changes that have taken place you do not have a completion date for the sale As with all time-sensitive transactions, a
within lending, there has also been something of your existing home. failure to deliver the finance at the agreed time
of a transformation on the borrower side. So individuals are taking out bridging loans usually results in the purchase falling through.
The rise in bridging that some predicted to secure property with cash ahead of the sale So dealing with highly-experienced staff able
would occur as a result of increased of their existing homes. It is useful to note here to expertly field enquiries and assist those
repossession and auction activity has not that where clients have little cash to put into intermediaries unfamiliar with bridging finance
happened to the extent first envisaged. It is now the purchase, but equity in their existing is key.
apparent that there has not been a boom in property, charges can be taken on both Now, more than ever, each case needs to be
demand for bridging from landlords eager to properties. handled by a dedicated case manager who is part
snap-up bargains at auction. of a team that is able to find ways to make deals
But the changed lending environment has Activity work: often thinking outside the box to come up
led to a dramatic shift of demand away from In addition to this type of customer demand, we with practical workable solutions.
unregulated lending, such as commercial buy- have noticed activity in the following areas: In many ways, the best bridgers are like private
to-let, towards regulated products. lProbate – to pay the Inheritance Tax owed on client departments at clearing banks, with the
an estate, after which the estate property can difference that they specialise in providing funds
Classic bridge be sold. at great speed.
This change has been nothing short of lDivorces – to release equity in the family home And, unlike high street lenders, they strive to
remarkable, and at Cheval we have seen to allow a partner to buy a new property make the experience - even for the most
borrower demand switch from predominantly pending the sale of the existing home. inexperienced intermediary - simple and stress-
unregulated to, in the main, regulated finance. lDownsizing – to allow mature borrowers to free.
January 2010  Mortgage Introducer www.mortgageintroducer.com
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