Bridging finance has continued to develop and grow over the last few years and I strongly believe the resilience of the market will continue now that the Mortgage Credit Directive (MCD) has finally arrived.
The rise of bridging finance
In the past, some perceived bridging finance as a last resort. However, in recent years, the sector has continued to shake off this perception and has cemented its reputation as a viable alternative and is on its way to becoming mainstream.
A significant amount of borrowers are faced with what seems like a never ending, uphill battle with high street lenders due to increasingly strict criteria and it’s therefore no surprise that around £2.5bn worth of bridging loans were written in 2015 alone. Enquiries for specialist loans are clearly on the rise and consequently, the more niche cases are creeping their way up the intermediary’s agenda. This demand has resulted in a significant rise in the amount of lenders offerings bridging products and solutions.
The MCD is upon us
I am confident that the bridging sector will benefit from the regulatory changes taking place in the wider mortgage market. However, like any new form of regulation, the directive brings about an element of doubt, particularly as there is still some misunderstanding about which areas of the unregulated market are now regulated. According to the directive, bridging finance must be used as a temporary solution while moving to another financial arrangement and, in order to remain exempt from the MCD, the loan must adhere to this.
Many intermediaries are now choosing to outsource the advice process to master intermediaries to help retain clients. Specialists like Brightstar have experience in placing client cases that have been declined by mainstream lenders, which allows the intermediary to expand their client offering and income potential. It is therefore important to seek advice from a specialist who is committed to ensuring the client is treated fairly when managing specialist cases.
Bridging the future
Due to the ever-changing needs of today’s borrower, specialist cases must be viewed on an individual basis. More suitable products are often secured when cases are referred to a third party and the client is also given better access to an extensive range of specialist lending options to suit their financial needs.
I am confident that the directive’s ruling will not adversely impact the bridging market. I can say with certainty that the directive will help to define exactly what is and isn’t regulated and this is a good thing for industry as a whole. However, although there is still some confusion amongst the intermediary community, I am sure that as things start to settle down, the anxiety around the regulatory changes will soon become a distant memory.
Kit Thompson is Brightstar’s director of bridging loans