CFI: News Review


One hell of a first half for short-term market


into the market, has also con- tributed to activity levels. indeed, there are now


by Yousouf Roze, director, First 4 Bridging


So, how did the bridging market fare in the first half of 2011 — and what devel- opments did we see in the sector generally? Well, to cut a long story short, it was one hell of an H1 in terms of both lending and corporate activ- ity.


although it started fairly


quietly, after a frenzied last quarter of 2010, by February and march activity levels had really picked up. Why? rising investor con-


fidence has certainly played a role but heated competi- tion among the lenders, com- pounded by new entrants


some fantastic rates in the short-term market, while loan to values have also edged up. there’s a real bat- tle among the lenders and the ultimate winner will al- ways be the borrower. But as well as being forced


to be more competitive, lend- ers have become more confi- dent generally. Partly this is because they


feel that the property market is unlikely to fold any time soon. a sideways moving property market is the overall consensus. nobody, barring the doom-mongers, expects further double digit falls. But this confidence is also


to do with the fact that most observers now expect Bank rate to stay either at its cur-


rent level or sub 1% for at least the next 12-18 months given the ongoing weakness of the economy. as long as the property market stays in the limbo it is currently in, that’s good enough for a lender. You could also say that


lenders, like most other busi- nesses in other sectors, have now got used to the market and economy. everyone has been operating in the shad- ow of economic uncertainty for nearly four years now and it’s time to move on. in the prime areas of the


capital, competition is espe- cially intense. Lenders are al- most falling over each other to get a slice of the action, even stretching LtVs to get the deal. right now, borrowers with the right credit history, equity


and track record are really in the driving position if they’re looking to secure against a high net worth asset in prime London. We’re currently helping


one such client secure funds for a development in one of the more sought-after areas of the capital and he’s not go- ing to have much of a prob- lem securing a very attractive rate on very attractive terms. Looking forward, in the


second half of 2011 we don’t expect a significant amount of change overall on the rate or product front, as the lend- ers may well be spent after a frantic first half, but who knows? the bridging sector has


thrown up no end of surpris- es during the first half of the year and the second could well be the same.


Short-term rate slashing unsustainable long-term


by Ed McAra, underwriting manager, Omni Capital


there’s nothing wrong with a bit of healthy competition they say. during the boom of the


sub-prime lending industry of the late 1990s and early 2000s, bridging finance had always remained a relatively niche product and was regarded by many as something of a cot- tage industry within the wider lending market. Whilst sub-prime lend-


ers have been and gone, the bridging market has stood its


ground. despite the overnight disappearance of many of the exits once provided by sub- prime and buy-to-let lenders the majority of bridging lend- ers managed to survive to tell the tale. Surprisingly, for what is still


considered a niche market, competition within the bridg- ing market is now probably greater than ever. the vast majority of the established lenders remain and have been joined by a number of new entrants over the past couple of years and it seems that a week doesn’t pass by without a new lender appearing in the trade press. When you consider that very few borrowers set out


looking specifically for bridg- ing finance, it is clear that the lack of liquidity and access to secure funding has made bridging finance such a strong proposition in today’s restrict- ed market. although strong compe-


tition may not be ideal for lenders, impacting on market share, margins and ultimately profitability, it can only be seen as a positive thing for brokers and borrowers alike, who are well placed to take advantage of the improved products that are becoming increasingly available. as lenders continue to com-


pete for market share, their margins are being eroded by the slashing of rates and con-


tinually inflating introducer fees and incentives to brokers at a time when the cost of funding isn’t cheap. Having seen a similar situ-


ation in the sub-prime sector previously, you cannot help but wonder how sustainable this is and ultimately if all of the current lenders will sur- vive if this practice continues. Whilst some of the smaller


family lenders are happy to continue to lend on a small- er scale, this may not be the case for a number of the big- ger players. if prices cannot continue to be driven down further, many lenders will have to look at other ways of increasing their market share.


mortgage introducer JULY 2011 55


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