More Regulated Bridging Lenders Expected Next Year
According to a recent study conducted by Bridging & Commercial, more than half of the lenders who took part were of the opinion that the number of regulated bridging lenders would be significantly higher in 2017 than in 2016.
Unlike high street banks and various other loan providers, bridging specialists are not forced by law to operate under FCA regulations – although a recent poll seems to suggest that borrowers are more inclined to do business with companies that are regulated than those that are not.
Bob Sturges, who is head of communications and PR at Fortwell Capital claims that the regulated bridging sector is saturated – at least from the perspective of a non-regulated lender.
He says that the number of new lenders seeking authorisation from the FCA has started to slow down significantly in a move that many have attributed to basic market forces rather than a result of the recent EU referendum.
However, according to another study, published earlier this month, Bridging and Commercial uncovered that no bridging lenders at all had applied for authorisation since the Brexit vote.
Will there be an increase In Demand for Regulated Bridging Products?
With future market conditions looking somewhat unstable, it looks like many high street lenders will be tightening their belts in terms of approving new loans and this could prove to be an open door for bridging loan providers.
If this happens, then we are likely to see a significant rise in the number of new lenders appearing in a sector which some say is already overcrowded.
One problem associated with a saturated bridging market is that increased competition is leading to increased LTVs with lower rates and this is something that has inevitably led to an increased risk from the viewpoint of those underwriting the finance.
A further increase in regulated lenders may only make the situation worse.
According to Benson Hersch, CEO of the Association of Short Term Lenders, although the number of bridging lenders applying for authorisation has come to a standstill since Brexit, there are still many who are seriously considering applying for FCA approval.
One of the advantages of being a regulated lender is that it enables the finance provider to offer bridging on primary residences and self builds, which opens the doors to a much more diverse range of potential clients.
A main worry held by the FCA is that we might see more and more unregulated lenders offering bridging products that only regulated lenders should be providing.
If this becomes commonplace, then it is feasible to assume that the FCA could seek to have the entire industry regulated.