Whilst most bridging lenders operating in the sector are not currently regulated, those who are regulated are anxious to ensure that all short term lending is carried out in an ethical and fair manner, and that customers are treated fairly.
This pursuit of an ethical lending ethos should encompass not only the lending practices of the bridging lenders and the size of the loan that they are willing to advance, but also, the advice that is provided by the introducing mortgage adviser.
In the largely unregulated bridging sector that we operate within, it is imperative that all parties act with the primary goal of delivering the most appropriate and fair solution for the borrower.
Bridging lending at north of 70%–75% loan to value in the current climate can only be considered as risky. Whilst there has been an upturn in term mortgage lending, there are still very few re-mortgage products available at this LTV. Due to this distinct lack of such remortgage options, it would be unfair and highly unethical to allow a borrower to enter into a bridging loan agreement which is reliant on an exit that is simply not widely available at present.
It is unfortunate therefore that the bridging sector is seeing an increasing number of lenders offering bridging loans at these ratios.
Those of us who have operated in the sector for a number of years and whose memories are long, will recall a similar pattern of LTV rises creeping around 2005–2007. These rises were followed by major losses when the financial world collapsed, and it is essential that this does not happen again.
The question therefore needs to be raised – Is the non-regulated property finance market, which captures most of the bridging sector, starting to see irresponsible and cavalier lending in order for certain lenders to secure market share merely by offering unrealistically high LTVs?
Steve Woods is head of sales at Bridgebank Capital