Vic Jannels

Caution, calm, customer focus deliver growth

Vic Jannels

CEO, ASTL

The latest lending data from the ASTL shows that in the first quarter of this year, bridging applications and completions fell back from their record highs in Q4 2021. They do, however, remain strong when set against the long-term average, and data on default rates and average LTVs is also encouraging in terms of the quality of the loans that are being written.

The figures, compiled by auditors from data provided by members of the ASTL, show that bridging completions reached £1.04bn in the quarter ending March 2022, a fall of 15.8 per cent on the previous quarter, when they reached £1.24bn. However, they remain higher than the same quarter last year, when completions were just over £900m, and completions have now been at more than £1bn for four consecutive quarters for the first time since records began.

Bridging applications fell more significantly in Q1 2022, to £6.34bn, representing a drop of just over 50 per cent on the previous quarter. And the size of loan books has also fallen, standing at £4.48bn at the end of this March, down from £5.08bn at the end of last December.

At the same time, the value of loans in default has now fallen for five consecutive quarters, decreasing by 12.5 per cent compared to December 2021, and average LTVs have also fallen. The average LTV on a bridging loan is now 58.7 per cent, compared to 61.2 per cent in the December 2021 quarter.

These last two statistics are encouraging as, in the current economic environment, all lenders should be taking a measured approach to growth. There is definitely room for our market to grow, and I have no doubt that there are situations in which bridging could prove the most suitable solution for clients but is still not always being considered by brokers.

“The UK economy contracted by 0.3 per cent in April, following its fall of 0.1 per cent in March, and the warning signs are that circumstances are only going to get tougher”

However, we must take a cautious approach to this growth. Official figures show that the UK economy contracted by 0.3 per cent in April, following its fall of 0.1 per cent in March, and the warning signs are that circumstances are only going to get tougher as the year progresses. The situation in eastern Europe has exacerbated already problematic supply-chain issues, stymied trade and investment flows in many areas, and created overall uncertainty beyond our shores. At the same time, inflation has hit a 40-year high, and we all know that food and energy prices are going to continue to soar.

All of this will take its toll on affordability, credit ratings, deposit savings, and many other elements of buying property. We are likely to see an increase in chain breaks, and an increasing number of borrowers turning to the specialist market. On the development side, projects will be facing supply-chain concerns, labour shortages, and any number of other unexpected delays.

In this type of environment, sensible, sustainable lending can prove invaluable to customers, and so it is important that we continue to make bridging finance available for short-term cashflow requirements. At the same time, now is not the time to be chasing volume by taking on unnecessary risk.

There are economic indicators that are more positive and give reason to be optimistic about the longer-term outlook. Employment is high, and the number of job vacancies has exceeded unemployment for the first time since records began. The property market also remains buoyant, with activity remaining strong.

For brokers, now is the time to work with lenders whom you know you can trust to take a robust and fair approach. In order to ensure that your clients are treated well and provided with the best possible outcomes, we would encourage you to work with lenders that remain committed to transparency, customer focus, and diligence. In short, we would encourage you to work with lenders that are members of the ASTL.

Our code of conduct, to which every member must commit, ensures that firms act with honesty and integrity, disclose all costs up front, and avoid excessive fees and unclear terms – and that’s just for a start. Our members set a high benchmark for quality service, customer focus, and responsible lending. A full breakdown of our code of conduct, as well as our rules for members, can be found on the ASTL website.

There is no perfect formula for lending, not least with the kind of challenges currently on the horizon. However, by working with an ASTL member, brokers can be sure that every step is being taken to ensure a positive experience and outcome for all.