It has been interesting recently to read all the analysis of the 10-year ‘anniversary’ of the start of the Credit Crunch. For a start I’m not sure ‘anniversary’ is the right word in the first place as it’s certainly not an event worth celebrating, given what was to follow for those of us who work in financial services.
It’s also been intriguing to look at the views of the major players involved in that crisis, what they did (or didn’t do) to contribute to it, how they reacted, what plans they actually put in place to deal with it, and how long they actually stayed in their jobs after it?
There appears to have been short-term memory loss on the part of some key instigators – Sir Mervyn King being a prime example – who appears to think he was not culpable in any way, shape or form, along with many other market players, despite the biggest financial calamity in recent memory happening on his watch. There are plenty of others of course who follow the same, ‘It was nothing to do with me Guv’ opinion and I can’t help feeling that some of those should have actually done time, rather than being provided with honours.
However, what happened post-Crunch is particularly interesting, especially if you are involved in the bridging finance sector, because there’s no doubting that the capital markets drying up, and many lenders leaving the mortgage market, helped forge the bridging market we have today. Post-2007 saw a significant increase in the number of bridging lenders active in the market and a surge in demand from investors, developers, landlords, and the like, who were no longer able to access their finance needs from traditional sources.
And so, as lending dried up there, it was the bridgers in a very true sense who came to the rescue of many a client who were otherwise looking down the barrel of their purchases, renovations, etc, being blown to smithereens. As time has moved on it’s been pleasing to see bridging activity maintaining strong levels, and while we have seen a few notable lenders pop off this mortal coil, I would hesitate to say that the number of lenders has continued to expand, even while the more traditional mortgage avenues have opened up.
Looking at the most recent bridging lending figures from the ASTL, which show its members having exceeded £3bn pa for the first time, I can’t help feel that today’s market is showing elements again of that post-Credit Crunch situation I talked about above. Consider, for instance, the buy-to-let market which post-Crunch regained ground relatively quickly and prior to 2015/16 was beginning to show signs of ‘boom’ activity before the Government and the regulator became nervous and started to act.
Since that significant level of intervention, demand for buy-to-let lending has dropped because it is much more difficult to get a loan, and from the end of September for ‘portfolio landlords’ the environment is going to be even more tricky with plenty more hoops to jump through. This, more traditional, avenue of finance now appears to be somewhat snarled up, and we can certainly see some similarities with 10 years ago here, in that clients (and their advisers) are looking elsewhere for funding and, as the figures show, one suspects they are returning to the bridging sector in some considerable numbers.
However, as you might have guessed, the sector itself is rather more complicated and complex than it has been for some time. Lenders make their mark, some stay, some leave; product rates, features and criteria are continually changing and it requires some considerable specialist knowledge to know that you are getting the right deal for the client. Plus of course, each lender looks at deals differently and having a strong relationship, and knowing which lender is the right one, can make all the difference in terms of either getting the finance or having to go elsewhere.
In that sense, while you might consider working the deal yourself, it may be more prudent, economic and timely to use a specialist like ourselves who can look after all aspects of the deal. You’ll know that your client is getting the best service plus you’re making the same income as you would have done direct.
10 years is a long time and much has changed however the nature of bridging has remained the same, albeit with a much more intense market to deal with. Perhaps the time has come, if you have a potential bridging client, to introduce them to a specialist so that you can be confident there’ll be no ‘crunch’ when it comes to getting them the finance they want and need.