UK Finance predicts that gross mortgage lending will fall by 15% this year, from £322bn in 2022 to just £275bn in 2023.
I don’t think anyone is in doubt that there will be fewer mortgages written overall this year than last.
This doesn’t mean all broker firms will suffer a fall in business, of course. Businesses can, and frequently do, buck the trend of a difficult macro-economic environment by identifying new ways to increase their revenue.
Many clients are in need of ‘transitional’ funding
So, if you are determined to see your business grow in 2023, rather than shrink, how will you spot new opportunities to help your clients achieve their objectives?
When it comes to property finance, once you start to sit up and take notice the opportunities are all around us. Next time you drive down a road, take note of all the buildings that have scaffolding, or have a skip outside; you will spot them more often than you may think. And you don’t even need to leave the house to see situations where there are customers whose plans rely on property finance.
As a nation, we seem to be obsessed by television programmes that feature people buying and renovating run-down properties, or even building homes from the ground up. These programmes frequently touch on the cost of the works, but they rarely give any attention to how those costs are financed.
Perhaps the term ‘bridging’ is offputting for some brokers, who still deem this type of lending expensive and opaque
Just as with the skips and scaffolding, the property renovations on television are, more often than not, financed by short-term property lending. Loans are secured on a property for a number of months, before being exited by refinance onto a longer-term product or sale of the asset.
Bridge closure
This column is called Bridging Watch, and most of you know of this type of finance as ‘bridging finance’. However, I wonder if that term is holding back the market from realising its potential.
Many brokers will be quick to assert that they don’t offer bridging loans to their clients. However, a large proportion of these brokers will have clients who have a transitional funding requirement to help them achieve their longer-term property objectives.
It may be that they are refurbishing a property, or perhaps they are using the time and money to address the lease on a flat that may otherwise be considered unmortgageable.
In helping clients to finance this transition, brokers can create new opportunities
For homemovers, it could simply be the case that they are in a position where they need to complete on the home they want to move to before the funds are released from the sale of their existing property.
All of these circumstances are situations where ‘transitional’ short-term finance can play a key role in helping your clients to achieve their objectives, and ultimately result in good customer outcomes.
Perhaps the term ‘bridging’ is offputting for some brokers, who still deem this type of lending expensive and opaque. This is no longer the case, and it hasn’t been for some time.
The market has grown beyond recognition in terms of volume, influence and reputation. It’s highly competitive and customer focused, and members of the Association of Short Term Lenders commit to our strict Code of Conduct, which puts emphasis on high standards of transparency in delivering the best outcomes for customers.
I wonder if the term ‘bridging finance’ is holding back the market from realising its potential
We will soon be launching the Certified Practitioner in Specialist Property Finance optional e-learning programme, which we are delivering alongside our colleagues at the Financial Intermediary & Broker Association and the London Institute of Banking & Finance. This will help to further raise standards and support the sustained growth of the sector.
I am not chief exec of the Association of Bridging Lenders; I am chief exec of the Association of Short Term Lenders. But I could easily also be chief exec of the Association of Transitional Property Finance.
Nobody walks into a broker’s office demanding a bridging loan, but it’s highly likely that you will encounter clients who have long-term objectives for which they require transitional finance to help them overcome a short-term hurdle. In an uncertain economic environment like today’s, those short-term hurdles are ever more prevalent.
The market has grown beyond recognition in terms of volume, influence and reputation
It’s important that customers enter this type of finance with their eyes open. The exit is paramount, and brokers should start any conversation by talking about the objective and the exit strategy, working backwards to understand their client’s immediate requirement.
In helping clients to finance this transition, brokers can create new opportunities to provide a valuable service and open new doors for customers.
So don’t be blinded by the term ‘bridging’. Open your eyes to this sector and you could find a whole new range of solutions to help your clients.
Vic Jannels is chief executive at the ASTL
This article featured in the April 2023 edition of MS.
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