Benson Hersch the chief executive of the Association of Short Term Lenders (ASTL), writing in the magazine Mortgage Solutions in September 2016, looked at the challenges and changes facing the bridging lending market and urged lenders to ‘rise to the challenge’.
Recently, Aldermore Bank stopped lending bridging loans, saying that it wanted to concentrate on its core lending area. This has led to speculation that more lenders will exit the bridging loan market. Hersch points out that many bridging lenders are still managing record business, with some firms entering the market. If some lenders leave, this should not pose a problem, he says.
Hersch also looked the changes happening in buy-to-let mortgages. A few lenders are requiring a 150% rental cover on buy-to-let mortgages. The loan-to-value (LTV) is a percentage figure that is calculated by the percentage of a property that is mortgaged, and many mortgage lenders are decreasing LTVs on higher value properties. This could, according to Hirsch, make bridging lenders cautious about advancing 75% LTV bridging loans.
Another factor affecting bridging loans is the weakness of the property market. In the Mortgage Solutions article, Hersch draws attention to estate agent Countrywide’s report that London property prices have fallen by 6% in 2016 and predicts that property prices will fall in the rest of the country by 1% in 2017. However, prices are expected to recover in 2018.
Hersch’s advice to bridging loan lenders is:
“We certainly do live in interesting times. Let’s rise to the challenge.”